FTAI Infrastructure Inc. Q4 FY2025 earnings call

• Adjusted EBITDA for Q4 was $80.2 million, a new quarterly record, excluding a $9 million gain from a non-core investment. Full fiscal year 2025 adjusted EBITDA was $232.3 million. - In 2025, FIPP had active transactions, including purchasing 100% of Longridge, acquiring Wheeling and Lake Erie Railroad, and commencing activity under a new ammonia export contract. - Priorities for 2026: Integrate Transtar and Wheeling, with over half of $20 million annual cost savings implemented so far; continue monetizing Longridge; pursue rail M&A opportunities and advance new contracted business at Jefferson; make progress on Phase 3 at Rapano.

Rail segment: Posted revenue of $86.4 million and adjusted EBITDA of $41.3 million in Q4, up from $61.7 million revenue and $29.1 million adjusted EBITDA in Q3. Transtar had stable carloads, average rates, and revenues; Coke volumes were lower due to an incident but recovered. Wheeling had revenue of $43.8 million and adjusted EBITDA of $19.3 million in Q4, up 8% and 34% year-over-year respectively. Longridge: EBITDA was $36.2 million in Q4, a new quarterly record, with gas production averaging ~105,000 MMBTU per day. Jefferson: Reported $23.5 million revenue and $13.6 million adjusted EBITDA in Q4, up from $21.1 million revenue and $11 million EBITDA in Q3, with activity from new ammonia export contract and ongoing negotiations for other contracts.

• 2025 adjusted EBITDA was $232.3 million, up from $127.6 million in 2024. - Expect 2026 to be highly productive with progress on integration, Longridge monetization, rail M&A, Jefferson contracted business, and Rapano Phase 3. - Goal to have announced Longridge transaction in first half of 2026.

Q: Good morning, 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 ammonia contract that should flip to a full quarter of impact?

A: 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.

Q: 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?

A: 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.

Q: 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?

A: 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.

Q: 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.

A: 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.

Q: 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?

A: Yeah, I'm glad你 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我 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.

Q: 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你 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?

A: 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你'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你 should assume we use proceeds from the Longridge sale to deleverage high-cost debt.

Q: 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?

A: 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你 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.