FTAI Infrastructure Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Board authorized a $0.03 per share quarterly dividend to be paid on March 26.
• 2024 adjusted EBITDA was $127.6 million, up from $107.5 million in 2023, more than doubling over two years.
• Long Ridge: Completed debt refinancing and acquisition of 49.9% stake, expected $160 million annual EBITDA; capacity revenue increase starts June 2025; gas production to start.
• Repauno: Signed Phase 2 contract, $300 million tax-exempt debt secured for construction.
• Jefferson: 3 contracts with $25 million annual EBITDA starting in 2025, potential $120 million annual EBITDA with new deals.
• Transtar: 15%-20% organic growth expected in 2025, evaluating 6 M&A opportunities.

Segment Performance

• Transtar: In Q4 2024, revenue was $43.3 million and adjusted EBITDA was $19.4 million, compared to Q3 2024 with revenue $44.8 million and adjusted EBITDA $21.1 million. For 2024, both revenue and EBITDA increased vs 2023. 2025 is expected to have roughly 15% to 20% organic growth, with incremental growth from M&A opportunities.
• Jefferson: Q4 2024 revenue was $21.2 million and adjusted EBITDA was $11.1 million, vs Q3 2024 revenue $19.7 million and EBITDA $11.8 million. Excluding asset sale gains, Q4 EBITDA was up ~$2 million from Q3. Has 3 contracts with $25 million of incremental annual EBITDA starting in 2025, and potential ~$120 million annual EBITDA if new deals are secured.
• Repauno: Signed additional contract for Phase 2 NGL export system, with contracted volumes 40,000 barrels per day and ~$50 million of annual EBITDA. Phase 2 construction expected mid-2026, financed with $300 million tax-exempt debt.
• Long Ridge: Q4 2024 EBITDA was $9.9 million. Closed debt refinancing and acquisition of 49.9% stake, expected $160 million annual EBITDA. Capacity revenue increase of $30 million starts June 2025, and gas production to start adding $10 million to $20 million of annual EBITDA.

Guidance

• 2025 expected substantial growth; Long Ridge expected $160 million annual EBITDA.
• Repauno Phase 2 construction expected mid-2026.
• Jefferson potential $120 million annual EBITDA with new contracted business.
• Transtar expected 15%-20% organic growth in 2025.

Risks

• Forward-looking statements by nature are uncertain and may differ materially from actual results.
• Market conditions and competition could impact M&A success and business development.
• Interest rate fluctuations could affect financing costs for projects and acquisitions.

Question and Answer

Q: Hi, good morning. Congratulations on the continued execution of getting contracts together and moving forward with all the different plans here. One thing I'm curious about looking at Jefferson, can you expand on the type of new deals you're working on at Jefferson, what kind of products you're looking to engage in and what the contribution could be over time?

A: Yes, of course. Good morning, Giuliano. We're looking at a little bit of everything, crude oil, natural gas liquids, renewables, including ammonia, all of these energy flows, primarily all exports are in some form of negotiation with counterparties at Jefferson. Crude oil is largely focused on waxy crudes coming out of Utah. Jefferson was the first terminal in the US to export waxy crudes to the European market. I think that sets the stage for a long-term contract with the counterparty we engaged with last year to do so. And so we're advancing those discussions. Natural gas liquids, there's a lot of natural gas liquids, butane, propane flowing out of the Permian and we don't have enough domestic demand for those products. And so the export markets are where a lot of producers are looking. We've got the capability at Jefferson to export substantial volumes of product, particularly through our Jefferson South terminal. And so I'm excited about the NGL project in particular. I think that's got significant potential. It could be highly, highly accretive. Finally, ammonia, we have our one pneumonia contract in place that kicks off this summer. There is a second opportunity that we have been negotiating that would double the volumes of ammonia that we export through the terminal and that one continues to be in negotiation. So I like having multiple products with different counterparties out there. There are a handful of others as well, but those are the three big types of products and opportunities that we're negotiating, currently.

Q: And on a different topic, looking at Long Ridge, congrats on getting all the recent transactions done. So one thing I'm curious about is how soon you'll see the $160 million EBITDA from Long Ridge start to show up in consolidated results?

A: Yes. The third quarter of this year will reflect the entire $160 million. Obviously, the first quarter will reflect half of this recent transaction. We really just closed this transaction. We really just closed the transaction for the purchase of the minority equity sake this week. And so we'll only see looking a little bit more than one month impact of that in Q1. We'll see all of it in Q2. June 1st is when the $30 million of increased capacity revenue kicks in. And so we'll only see one month of the incremental capacity revenue in Q2. So finally, I think when we get to Q3, we'll be running at that $160 million of EBITDA. Look, there's potential we exceed that number. We are going to bring online a significant amount of gas production. I can't tell you precisely, of course, what gas prices will be this summer, but we'll certainly be in a position to sell into the market and depending upon where gas prices are, we could be running in the third quarter at a level higher than the $160 million. So third quarter is when you'll see it all.

Q: Thanks. Good morning, everyone. So a question on Repauno to start. Is there an update on permits for the underground cavern and just the timing around it? And then can you remind us of the potential from Phase 3 longer-term and kind of when you get that into place and that path forward is clear. I mean, does that increase the probability of a sale of Repauno at some point? Just curious, your thoughts there.

A: Yes, good morning, Brian. You know, it's a marathon, not a sprint, but we're approaching mile 26. We expect to have the cabin permits in-hand by the end of this first quarter. We have been working very closely with New Jersey DEP. We had a great dialogue and I think we're finally in the -- at the end of the process. It's been a lengthy process, but I do think we're very close to the end. Look, the economics on cavern development will depend upon precisely what we end up developing. At the end of the day, the economics are materially more attractive than above-ground storage. Caverns are less expensive to develop, generate, of course, the same amount of revenue and require little-to-no maintenance capital going-forward. I'm really pleased with the result from the New Jersey Economic Development Authority and the support for Phase 2. I think it bodes well for potentially additional low-cost debt financing to support Phase 3. Big picture, I think Phase 3 could be transformational for Repauno, easily generate an incremental $100 million of EBITDA for the business. Yes, it would require some capital, but roughly $300 million of capital for $100 million of EBITDA. That's a pretty good -- a pretty good investment. I'm not sure we need to go through the whole process of building caverns and bringing them all online. Yes, I think as soon as we're permitted and we're underway, I think we've created a lot of value at Repauno. So yes, the idea of a monetization at that point in time is something we're certainly evaluating.

Q: Yes, hi. Thank you, and good morning. I was hoping to get a little bit more color around the HPC opportunity at Long Ridge and that it -- like my question really is around the capacity demand response and you're participating in that for this year and next year. And I guess my question is, as we look forward into the next capacity demand response, which I guess is coming up here in the next few months, how does participating in that going-forward impact your ability to kind of shift over to HPC customers?

A: Yes. Well, I'll say a couple of things. The auction results, of course, were tremendous for the year starting June 1st, and we're excited about that and we don't see any reason for those levels to be declining. It's just an annual thing. And so in the event, there are multiple forms that a transaction could take. Well, one is buying power from our own power plant and that's certainly interesting. We sell power today at $42 per megawatt and pricing for behind-the-meter transactions is $70 to $80 a megawatt. We would not, in that case, participating at the capacity auction, of course, but it would still be a highly accretive thing to do. But remember at Long Ridge, we have significant land holdings and we also have significant permits and access rights to the grid. And so we're in a region that is highly favorable. And frankly, there may be projects with data center developers that only required lease of land, access to the grid, and the building of backup power. And what I like is the conversations that we're in right now have multiple flavors and that allows us to have lots of different opportunities, all of which are very good. So I can't tell you precisely which direction we're going. I don't think the capacity auctions and participating in those capacity directions are going to be a real speed bump for us given we're just committing on an annual basis. So for some reason, we wanted to do something completely behind the meter, including the power plant. By the time facilities are built, we'd be out of our obligations to provide power under the grid.