FTAI Infrastructure Inc.

Good morning and welcome to the FTAI infrastructure first quarter 2026 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal conference specialist by pressing the star key followed by zero. After today's remarks, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Alan Andrini of Investor Relations. Please go ahead.

Thank you, Jason. I would like to welcome you all to the FTI Infrastructure Earnings Call for the first quarter of 2026. 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.

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. Before we get into the quarterly financial results, we're going to kick things off with a discussion of Longridge and provide some details on the sale transaction that we announced last week. I'm going to briefly walk through the transaction terms, and then I'll talk a little bit about why we believe it to be an important and highly creative event for our company. Just over a week ago, we signed an agreement to sell Longridge to Mara Holdings for an aggregate transaction value of $1.52 billion. We expect to close the transaction in the third quarter of this year after receiving required regulatory approvals, and there are no other material conditions to closing. Existing Longridge debt will either be repaid or assumed by the purchaser, bringing expected net proceeds to FIP in excess of $300 million. We're pleased with the outcome of the sale process and believe Mera is a great fit as the next owner of Longridge. I want to recognize and thank Bo Woley and the Longridge team for doing a remarkable job throughout the entire life cycle of our investment, developing the business plan, building a power plant, acquiring gas reserves, and turning on and maintaining operations to ultimately create what today is one of the most efficient and profitable power assets in the country. The transaction value reflects the uniqueness of the Longridge asset and and results in a meaningful economic return for FIPP over the life of our investment. More importantly, the sale of Longridge will allow us to accomplish two key goals. First, deleveraging. We plan to use the bulk of the net proceeds received at closing to repay higher-cost debt at our parent level, resulting in lower interest expense and higher free cash flow going forward. Second, increasing our focus on our core freight rail business. We expect 2026 to be an active year for our railroad with growth driven internally by integration of Transtar in the wheeling and externally as we pursue a number of acquisition opportunities that leverage our existing platform. Having higher cash flow and additional debt capacity to fund acquisitions puts us in a good position to make accretive investments in the rail sector in the near future. I'm going to flip to page four and we'll talk a little bit more about deleveraging. As you may recall, our existing corporate debt contains terms allowing for repayment with proceeds from the long-ridge sale to be made at a lower premium than would otherwise be due if funded with other sources of cash. So with less premium required, we were able to repay more principal. In total, we expect to reduce parent debt by at least $300 million and reduce our parent-level interest expense by about $30 million per year meaningfully improving our leverage metrics. We expect our leverage metrics to continue to improve over the next several quarters as we realize more integration efficiencies at our rail business and bring online new business at our terminals, especially Rapano. Turning to slide five, with the deleveraged balance sheet and higher free cash flow generation, we expect the bulk of our long-term growth going forward to be driven in the rail sector. We have an enormous opportunity set in front of us in the North American freight rail space. and an exceptional platform from which to grow. We expect the remainder of 2026 to be a particularly active one for the rail sector M&A, and we're actively evaluating multiple opportunities and look forward to reporting back on our progress. While we expect our freight rail business to emerge as the dominant source of earnings for us going forward, we're also excited about the future of our two terminals and are focused on ensuring that both Jefferson and Rapano each reach their earnings potential with a view to monetizing both assets in the future. Jefferson is currently engaged in conversations with customers for new business, representing at least $50 million of additional annual EBITDA. And Rapano similarly is expected to complete its Phase II expansion at the end of this year and start revenue service shortly thereafter. Now we'll go into the results for the quarter. Adjusted EBITDA for Q1 came in at $70.6 million, up materially from $35.2 million for the first quarter of 2025. Given the investment activity during last year, year-over-year comparisons are less meaningful, but I can say that the quarter was a strong one that reflected great progress across our portfolio. At Longridge, we took an outage for 25 days that impacted revenues and EBITDA for the quarter. The outage was planned but longer than typical as it related to inspection of the hot gas section of the power turbine, which requires more time but is only required to take place every four to five years. The inspection resulted in a clean bill of health, but did result in lost revenues for the quarter. Excluding the impact of the outage, our consolidated Q1 EBITDA would have exceeded 80 million for FIP and represented a new record. It's important to note that our Q1 results do not reflect a tremendous amount of activity across our business that we expect to contribute to EBITDA in the future. We provide some detail around some of those specific items and the math on the right side of slide seven. Each of the lighter blue shaded bars represent specific items that require no incremental capital and are either already contracted or otherwise represent cash flow streams that we have confidence in. Importantly, the bar chart does not include any organic growth or new business wins that we believe could be material and also contribute to incremental EBITDA going forward. I'll quickly flip to slide eight and talk through the highlights at each of our segments. In a rail segment, adjusted EBITDA was $40.2 million in Q1, up 31% on an apples-to-apples basis versus the same quarter last year. Q1 was the first full quarter during which we had active control of the wheeling, and we've already begun to realize a portion of our targeted integration savings. At Longridge, EBITDA for the quarter was $26.4 million. As I mentioned, without the 25-day planned outage, we estimate that EBITDA for the quarter would have approached $40 million. Gas production for the quarter continued to above amounts required to fuel the power plant, so we also generated revenue from excess gas sales during the quarter. At Jefferson, EBITDA for Q1 was $14.4 million and included a full quarter of results from our new ammonia transloading contract. And at Rapano, construction of our Phase II transloading product continues to progress on plan. Once Phase II is operational, which is planned for 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 revenue, EBITDA. Moving to slide nine, our details capital structure. During Q1, we closed our new term loan of approximately $1.35 billion. The net proceeds were used to repay in full the initial loan we issued in connection with the acquisition of the Wheeling last year. The new term loan represents the only debt at our parent level and carries a coupon of 9.75% per annum. As I mentioned, the loan is prepayable at a reduced premium with proceeds at a longer sale. So we expect the balance of the term loan to be approximately $300 million lower following closing of the sale. Also during the quarter, we received commitments for the refinancing of a little over $200 million of debt at Jefferson. The net result of everything is a stable balance sheet with no near-term maturities. and a path for meaningful deleveraging in the coming months following the Longridge sale. Moving to slide 11, we'll dig a little deeper into the results at each of our segments, and we're going to start with our railroads. We posted revenue of $85 million and adjusted EBITDA of $40.2 million in Q1, compared with pro forma Q1 2025 revenue of $79.3 million and adjusted EBITDA of $30.6 million. Our actual reported results for last year exclude the results of the wheeling, so we're showing pro forma figures to demonstrate what revenues in EBITDA would have been if we include the wheeling standalone results for last year. Growth versus last year was driven by a combination of revenue growth from both higher volumes and rates, as well as reduced expenses as a result of the initial impact of a large set of cost savings initiatives, which we started to implement in Q1. I will note that the first quarter is typically the softest quarter for our business, especially at the wheeling, where volumes of aggregates and other construction materials always slow down during the winter months, so we're particularly pleased with our results for Q1. Flipping to side 12, we're off to a great start with the combination of Transtar and the wheeling. We expect the combination to result in two sources of financial gains. The first is cost savings, which we expect to impact our results in the near term, and the second is new revenue opportunities which we expect to occur over the longer term. Cost savings fall into two primary buckets, personnel reductions, purchasing power savings, and reduced overhead. In total, we're targeting about 23 million of annual cost savings, of which 10 million of annual savings was enacted in Q1, representing 2.5 million of EBITDA for the quarter. The additional 13 million of annual cost savings should be in effect in the relatively near term. On the revenue side, we continue to grow the list of opportunities now that the two railroads are operating as one. Additional propane carloads are planned to start early next year when Rapano's Phase II commences operations. Additional carloads of propane should be substantial given the volumes originate on the wheeling and move to Rapano. And the pipeline of additional opportunities is substantial. In total, we're estimating in excess of $50 million of incremental annual EBITDA potential from the various new revenue sources manifesting in the future. To shift to slide 13, talk about Jefferson. At Jefferson, we reported 27.3 million of revenue and 14.4 million of adjusted EBITDA in Q1 versus 19.5 million of revenue and 8 million of EBITDA in Q1 of last year. Volumes at the terminal averaged 275,000 barrels per day, driven by the startup of the new ammonia export contract, which commenced in late November last year, as well as increased volumes of inbound crude oil during the quarter. To date, inbound crude volumes have been unaffected by the conflict in the Middle East and the blockage of the Strait of Hormuz, as crude destined to Jefferson has originated largely from Saudi West Coast terminals. We continue to see crude volumes steady so far in the second quarter. We're negotiating new contracts to expand our business at Jefferson. The largest opportunities we are pursuing are with existing customers and involve expansions of the services we currently provide to them. 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 thereafter. In total, the three opportunities represent an excess of $50 million of annual incremental EBITDA and utilize existing assets requiring little to no incremental investment capex. Now shifting to Rapano on slide 14. Our primary focus at Rapano is on phase two, where construction continues to proceed as planned toward our goal of 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. With the disruption in the Middle East, spreads for propane exports are extremely attractive, and based on conversations we're having, we continue to expect to commence revenue service 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. And finally, on slide 15, we'll briefly close out with Longridge. Given the pending sale, I'm only going to hit the highlights for the quarter. Adjusted EBITDA came in at $26.4 million in Q1 versus $18.1 million in Q1 of last year. Power plant capacity factor of 73% was impacted by the 25-day planned outage that I described earlier. But away from the outage, the fundamentals continue to be strong with power prices and capacity revenue continuing at historically high levels. We averaged a little more than 86,000 MMBTU per day of gas production versus the little more than 70,000 required at the plant. We expect to maintain production significantly in excess of plant requirements and generate continued revenues from excess gas sales in the quarters ahead. So far in Q2, Longridge is off to a great start with capacity factor at 100% currently and gas production continuing in excess of our plant's needs. I'm going to conclude our remarks there, and I will now turn it back to Alan. Thank you, Ken.