Q4 2022 FTAI Infrastructure Inc Earnings Call

Speaker 1: You.

Speaker 1: No translation provided.

Speaker 3: Good day and welcome to the fourth quarter 2022 FDAi 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 is being recorded.

Speaker 4: I would like to turn the call over to Alan Andreni, head of investor relations. You may begin. Thank you, Michelle. I would like to welcome you to the EFTI Infrastructure fourth quarter and year-end 2022 earnings call. Joining me here today are Ken Nicholson, the CEO of EFTI Infrastructure, and Scott Christopher, the company's CFO . We have posted an investor presentation and press release on our website, which we encourage you to download if you have not already done so.

Speaker 4: 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.

Speaker 4: 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. Today, we will be discussing the fourth quarter and full-year financials for F-TIE infrastructure and also providing details of the latest developments at each of our four business segments and our expectations for the year ahead.

Speaker 4: Briefly, before we get to the financials, I'm pleased to report that we will be paying our second dividend as a standalone company with our board authorizing a three-cent-per-share quarterly dividend to be paid to shareholders later this month. For this call, I will be referring to the fourth-quarter supplemental materials that were recently posted to our website. Starting with slide two, 2022 is an extremely productive year for us. We completed the spinoff of our company from EFI Aviation in August , establishing EFI infrastructure as a pure-play, growth-focused infrastructure business.

Speaker 4: Financially, adjusted EBITDA for the year came in at $88.1 million from our four segments, up from $58.5 million in 2021. More importantly, during the year, we completed a number of material projects and business developments that should position us for substantial growth in 2023 and the years ahead. All in, we firmly believe that the stage is set for a strong 2023.

Speaker 4: and continue to target achieving this year a run rate of 200 million of annual adjusted EBITDA from our segments with no additional capital required to meet that target. Focusing on the fourth quarter, adjusted EBITDA from our fourth segment for the fourth quarter was 9.5 million. As previously disclosed, our reported financials for the quarter were impacted by an extended maintenance and repair outage at our Longrage power plant. I'll provide some details on what happened at Longrage, but suffice it to say, we believe that the damage was an isolated event. All repairs had been made by the end of the quarter, and as of January 1st of this year...

Speaker 4: and have a new during the quarter resulted in an operating loss to be recorded for the quarter at Long Ridge. This Long Ridge loss accounted for the bulk of variance and are adjusted EBITDA.

Speaker 4: quarter resulted in an operating loss to be recorded for the quarter at Longridge. This Longridge loss accounted for the bulk of variance in our adjusted EBITDA compared to Q3 of last year.

Speaker 4: Away from the event at Longridge, we're happy with our accomplishments for the quarter. Each of Jefferson, Rapano, and Transtar progressed their respective business plans, and we believe we are very well positioned for a solid 2023 ahead. Slide four, briefly on the balance sheet, we have ample liquidity today, and during the quarter we put in place a new $50 million revolving credit facility at Transtar.

Speaker 4: Barring's under the TransStar facility may be used upon a gross project that TransStar and also provide working capital to the holding company have desired. In the aggregate, we had 1.2 billion of debt shown on the balance sheet at December 31, 473 million of which is issued at our holding company in approximately 700 million is issued at Jefferson on a non-recourse basis.

Speaker 4: As we have said in the past, we view the Jefferson debt more as an asset than a liability with extremely low interest cost, average maturity of 14 years, the flexibility to pay dividends from Jefferson with excess cash flow, and not callable in the event of a sale.

Speaker 4: That will become increasingly relevant as we anticipate Jefferson generating meaningful cash flow in 2023 and the years ahead Now that the new Exxon contract has commenced and we continue to see momentum down in Beaumont

Speaker 4: On slide 5 of the earnings supplement, for each of our segments, we provide our reported 2022 adjusted EBITDA as well as our annual targets. In the aggregate, we continue to target annual adjusted EBITDA in excess of $200 million. The targets shown for each segment on the slide represent our expectation for annual run rate EBITDA to be achieved this year.

Speaker 4: achieving these targets requires no additional capital. I'll report more details on the following slides, so just to give you some quick highlights for now. Transtar is a great producer of cashflow for us and we expect a number of new initiatives and third-party revenue to kick in starting in 2023. Jefferson continues to increase utilization of its now 6.2 million-barrel capacity terminal.

Speaker 4: We recently closed on the acquisition of an additional several hundred acre site in Beaumont that we expect to result in highly creative new developments in the years to come. The impact of this new site, Jefferson South, are not included in our $80 million EBITDA for Jefferson, so any income generated would be incremental to our targets.

Speaker 4: Rapaano, which will remain in the near term a smaller part of our portfolio in terms of EBITDA contribution, has tremendous upside and is on the cusp of entering into long-term contracts for its Phase II transloading system. Finally, with the repair behind us, our plant at Long Ridge is achieving near 100% capacity factor in generating cash flow from excess gas sales.

Speaker 4: I'll now turn to more details on each of our four core businesses.

Speaker 4: Starting with TransStar on slide six of the supplement. TransStar posted revenue of 150 million and adjusted to the top 64.3 million in fiscal 2022, our first full year since acquiring the business in August of 2021.

Speaker 4: Cash flow for the year was 66.7 million in excess of adjusted EBITDA as proceeds from non-core asset sales more than offset capital expenditures. For the fourth quarter, slightly lower carload volumes were the result of the temporary idling by U.S. Steel of one of two blast furnaces at the Mon Valley Works facility. The blast furnace came back online in January . EBITDA for the quarter was also included approximately 1.5 million of non-cash losses in connection with the sale of EBITDA.

Speaker 4: Our rail car and locomotive maintenance facilities are now open and serving customers. The number of third-party freight customers today stands at 30 and growing. Last year, we opened our first transload facility on our Michigan Railroad, and our real estate development pipeline is as strong as ever as we actively promote leasing and sale of over 700 acres of land.

Speaker 4: million of EBITDA in fiscal 2022 compared to 46.4 million of revenue and 10.6 million of EBITDA in fiscal 2021.

Speaker 4: Two material events transpired in the fourth quarter. First, at the end of the quarter, we completed construction and commenced terminal operations under our new 10-year contract with Exxon. Exxon's $2 billion blade expansion will increase Exxon's refinery capacity in Beaumont by approximately 250,000 barrels per day. We expect our contract to generate approximately 20 million of incremental EBITDA annually as we ramp up throughput volume in line with the blade expansion ramp up.

Speaker 4: Secondly, during the quarter we acquired an additional property in Beaumont to provide additional real estate for expansion and growth. We're seeing multiple opportunities for the storage, transloading and export of renewable fuels and hydrogen-based products. And with Jefferson nearing full build-out, this site is an ideal extension for our business. We expect this new addition, which we refer to as Jefferson South, to contribute incremental EBITDA as early as this year.

Speaker 4: We estimate that after including the minimum commitments only from the new Exxon contract, we will have capacity in place to more than double our volume and revenue. We expect a portion of this remaining capacity to be taken up from Exxon business in excess of the contracted minimums as the blade expansion ramps up over the next several months, and the rest represented by multiple customers and products we are in active discussions right.

Speaker 4: By the way, we expect the X, we, we, and X on both expect the ramp up employee to occur approximately in early April .

Speaker 4: Shifting to slide 10, at Rapano we executed a multi-year contract in Q4 to transload natural gas liquids using our phase one system. The contract, which is with one of the world's leading trading companies, commences on April 1 of this year and has a multi-year term with minimum volume commitments. With this contract in hand, Rapano is positioned to generate stable cash flows.

Speaker 4: while we focus on securing business for our larger Phase 2 Translating System. As detailed on slide, 11 of the supplement our Phase 2 system is expecting to materially increase our storage and throughput capacity when it comes online in a couple of years.

Speaker 4: In the aggregate, we expect phase two to represent in excess of 40 million of annual EBITDA once complete. We have demand for multiple international off takers and our goal is to enter into long-term agreements with multiple parties in the coming months. Finally, moving on to Longridge. Longridge generated 18 million in EBITDA in fiscal 2022, inclusive of losses incurred in connection with the fourth quarter outage.

Speaker 4: During the outage, we did continue the pace of gas production which partially mitigated the impact of lost power sales. As we looked to 2023 in the years ahead, we're enthusiastic about the future of long-range. Our newly acquired 12,000 acres of additional gas assets and what's Virginia essentially doubles our total gas supply. This new gas supply can ultimately drive up to 150,000 MNB2U per day.

Speaker 4: with first production commencing this year. Even at currently lower gas prices that equates to approximately 5 million of incremental monthly EBITDA for Longridge. We expect to finance the capital expenditures required to develop gas production with additional debt at Longridge and currently are in discussions with multiple lenders.

Speaker 4: We expect new light technologies to commence construction in the coming months on its new facility built on Long Ridge property which will produce carbon negative and biodegradable plastic products from natural gas. Long Ridge will sell power natural gas to New Light as well as provide land under a long term lease.

Speaker 4: In addition, we expect to be an investor in the project if certain conditions are met. And finally, we continue to progress efforts to be named one of four national hydrogen hubs under the Department of Energy's program to stimulate clean hydrogen production and use in key markets. Of the 79 parties submitting applications initially, Longreach has been shortlisted as an encouraged applicant to advance to the next round with updated applications due in April .

Speaker 4: While it's longer term process, we believe the ultimate outcome of being selected as a hydrogen hub could be tremendous. Up to $8 billion of grant funds will be made available to recipients.

Speaker 4: potentially bringing significant new developments at Long Ridge. Our plan is to first in America to blend hydrogen as fuel, and we believe we are well positioned to receive hydrogen hub designation and benefit from access to federal grant funding to develop additional behind-the-meter customers.

Speaker 3: With that, let me turn the call back over to Alan. Thank you, Ken. Michelle, you may now open the call to Q&A. Thank you. If you'd like to ask a question, please press star 11. If your question has been answered, and you'd like to remove yourself in the queue, please press star 11 again.

Speaker 3: Our first question comes from Juliano Ballona with Compass Point. Your line is open. Good morning and I'll have a question. Take this on a massive blast. Well, face us just to make it a little easier. Starting off with Transstar, I'm curious which blast furnace is down in the quarter and then when they start to come back online.

Speaker 4: Yep. At the Mon Valley, it was a blast furnace at the Mon Valley complex. They have two blast furnaces at Mon Valley and more up at Gary, but the two blast furnaces, one was down, so you get a sense for the impact it had with.

Speaker 4: you know, steel production at the Mon Valley complex. One was down toward the duration of the fourth quarter. It came back online in January . I came to provide a specific date, but it came back online in January . And it's been running at, you know, comparable pace from where it was prior to the fourth quarter. So it was one of the two blast furnaces in the Pittsburgh area.

Speaker 4: I mean, it's a, it's a, you know, it's a fight to say, you know, today, 80, 85% of our revenues are triple the US steel. And so as you watch US deals, you know, production figures, you can expect to transport to large lead track, you know, US deals results in that regard.

Speaker 4: We are, you know, part of why we're advancing these other initiatives to bring in third-party customers to diversify away from TransDurring. I think we're going to make a lot of progress in the quarters ahead in that effort. That's great. I'm actually kind of going on down that turn and thought with some of the new initiatives. Let's go.

Speaker 3: You have to see mapped out about 30 million of potential you could not have come to reaching from a series of new initiatives, you know, they're mostly third party related. I'm curious, you know, where you are in the very stages of ramping up or launching those initiatives and then how fast, you know, the trajectory of ramping up to about 30 million, even though it could happen over the next few quarters.

Speaker 4: Yep. You know, it's, I would say it's sort of a balance day. I can't say in any one initiative where, you know, ahead of another initiative, probably proceeding a little bit more quickly with third party customers. We'll be opening more trans-loading facilities, you know, in the quarters to come.

Speaker 4: Typically, the real estate development component is a little bit more lumpy and can take a little bit more time. It can be a little bit more episodic because those are more significant transactions where we land a new customer to build a facility and stimulate rail volume. So that's the one that I would say is probably slightly behind the other of our...

Speaker 4: of our total four key initiatives, which in real estate development is the one that would probably lag a little bit, but others are coming along as we speak. So in terms of the 30 million, look, we will be there by the end of the year, for sure. I think on some of these initiatives, we should be there possibly in the second quarter, or other watch the third quarter.

Speaker 3: I'd be curious if you could talk a little more about what happened with the turbine during the quarter. Yep. I'm glad you asked.

Speaker 4: You know, it's a large, complicated power plant, and when construction was completed, you know, there was material left behind. And when the power plant was turned on, that material was essentially sucked into the turbine and resulted in damage to the gas turbine. The turbine is cleaned and cleaned. Now, you better still continue on your own for some reason. You know,ury?? within the pipes the turn and for that reason, the gas difference appears out of the pipe. We are all being driven down.

Speaker 4: At the end of the day, without speaking out of school, that's obviously not supposed to happen. And I'm not permitted to talk broadly about where we may go with this, but suffice to

Speaker 4: Our position is we certainly have recourse and we're keeping our options open as to relates to the counterparties who worked with us on constructing the facility at Longridge. Look, I think the biggest, the most important thing is it's fixed. It's in the rear view mirror. Longridge is doing great.

Speaker 4: January , February , and we expect to continue to do incredibly well. We've got a ton going on at Long Ridge, and I think the next several years for Long Ridge are going to be super. You know, this is really to believe a nice related event, strictly related to the original construction of the plant.

Speaker 3: So fingers crossed, it's all behind us. That's great. I'm curious, you know, on the long run side, you know, I'm like, what does it mean to be, you know, designated hydrogen, but then just trying to get a sense of what that could mean for a contribution or an impact on the future? Yeah, it's not in our plan, of course. I think it would all be...

Speaker 4: Applications go in, they're going to cut that short list down to less than 10.

Speaker 4: and sometime later this year, you know, for maybe a couple more, will be designated as hydrogen hubs. We've got great partners. We're not applying on our own. We've got a couple of partners, very big names who are applying with us. It's up to $8 billion of total grant funds that will be awarded. Obviously, that's extremely significant. We have a...

Speaker 4: significant amount of ample land for carbon capture projects that could benefit from that grant funding. So, you know, it's this year's business in terms of the designation, in terms of what it means, and when, you know, it's probably a couple of years to build out facilities with those grant proceeds. But we're excited about it. I think we're really well positioned. That's great. And then, you know, putting over to Jefferson, I'd be curious about the ramp up of the Blade Reconner extension. And, um,

Speaker 3: Yeah, how's that thing get to full contribution? And then, you know, the, the, the, the beyond that kind of, you know, what are their initiatives underway and kind of how do the margins work, you know, with any incremental volumes to get closer to the 80 million number.

Speaker 4: Yep, yep. Well, I mean the contract commenced January 1. You know, the blade expansion, the sequencing with precision of the commencement of the contract and the 100% completion of the grant of the blade expansion was not a perfect science.

Speaker 4: The Blades image is coming online during this quarter and it will be online in full, fully ramped up. We expect that they're set on April 1st.

Speaker 4: You know, it's a $2 billion project, you know, for X on it. So I suspect that for this quarter volumes, you know, and payments will be closer to the minimums, the committed minimums, and the X on contract, and then as we transition into the second quarter, you know, in excess of the contract, and in line with...

Speaker 4: Our expectations look, it's a 30, 40, 50 year life project. So it's a big deal. It's huge for us. It's huge for X-ON. We're excited about it, but like all infrastructure projects, the timing of complete ramp up is not a perfect science.

Speaker 3: I think it will continue to ramp up this corridor and then we'll be ramped up as we swing into two two. That's great. And then on the reconnaissance, I'm just curious if you can just guess the new contrast design there.

Speaker 4: It is hopefully the first of additional business with this party and other parties. The contract is a multi-year contract that was a major trading firm for the transloading of butane and ultimate export of the project of the product.

Speaker 4: It does not use the entire capacity of Phase 1, so there is additional capacity and the team down and down and so the New Jersey is working hard to continue to increase capacity utilization of Phase 1. I would say it uses maybe a 65% of our capacity.

Speaker 4: What we like about the contract is it's just stable cash flow, we'll generate profits, you know, it basically will hit, you know, our $10 million target just with what we have in hand.

Speaker 4: And it allows us now to really, you know, proceed and focus all of our attention on phase two, and phase two is really what it's all about. Phase two is effectively ready to go. I mean, it is permitted design, engineering, construction, contracting is ready to go. We could hit the button, you know, tomorrow, quote unquote. We are in negotiations with.

Speaker 4: So half a dozen counter parties for long-term commitments to phase two. Having those commitments in hand is something we of course want to have before we commit the capital. I really don't think we'll need to commit much capital. I think most of it will be funded with tax exempt debt borrowings and we have everything set up to be able to hit the market on that. Obviously, the financing will only look...

Speaker 4: in Revenue and Casuala Rapano during the remainder of 2023. It doesn't kick in until April 1st, so we won't see much of that in the first quarter, but starting in the second quarter, we'll see the benefits of that contract.

Speaker 3: That sounds good. And just going back to the point you just made about on the permanent side. It's not that permanent for the underground cavern. Some like you're saying you guys are pretty much there and you can start your shovel ready. Just want to get moving. Yep. The um.

Speaker 4: No, what is permitted is new dock above ground storage tank and additional rail construction. What is incremental to Phase 2 is the below ground caverns, which is massive. That is not yet permitted. The permitting is underway. It will be completed in a couple of months.

Speaker 4: But it's a process. I think in the deck we talk about phase two on our expectations for approximately $40 million of incremental EBITDA contribution. That EBITDA contribution does not include the impact of any caverns. The caverns are important and it's a big, big area of focus for our team.

Speaker 4: But any revenue in EBITDA from the caverns would be incremental to the 40 million. The 40 million is just for the above ground storage facilities, dock and what have you. So everything's permitted except for the caverns where we're in the application process with the states, DEP, and I think that's got a few more months to go.

Speaker 3: That's great. I think that touched on pretty much everything. I appreciate the time there and I'm going to come back in the kit. Thank you very much.

Speaker 3: Thank you. There are no further questions at this time. I like to turn the call back over to Alan for closing remarks. Thank you all for participating in today's call. We look forward to updating you again after Q1.

Speaker 2: Ladies and gentlemen, this does include the program and you may now disconnect. Everyone, have a great day. The conference will begin shortly. To raise and lower your hand during Q&A, you can dial star 1-1.

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Good day and welcome to the fourth quarter 2022 FTAI Infrastructure earnings conference call. At this time, all participants are in listening mode. After the speakers presentation, there will be a question and answer session. Instructions will be given at that time. As a reminder, this call is being recorded.

I would like to turn the call over to Alan and Drini, Head of Investor Relations. You may begin. Thank you, Michelle. I would like to welcome you to the FTI infrastructure fourth quarter and year end, 2022 earnings call. Joining me here today are Ken Nicholson, the CEO of FTI infrastructure.

and Scott Christopher the company CFO . We have posted an investor presentation and 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 and listen only mode and is being webcast. In addition,

We will be discussing some non- GAAP financial measures during the call today, including the justice evita. The reconcilations 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 make different materially from actual results. We encourage you to review the disclaimers and our press release and invest in 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. Today, we will be discussing the fourth quarter and full-year financials for FTI infrastructure and also providing details of the latest developments at each of our four business segments and our expectations for the year ahead. Briefly, before we get to the financials, I'll please the report that we will be paying our second dividend as a standalone company was our board authorizing 8.3% per share quarterly dividend.

to be paid to shareholders later this month. For this call, I'll be referring to the fourth quarter supplemental materials that were recently posted to our website. Starting with slide two. 2022 was an extremely productive year for us. We completed the spin-off of our company from that biobation in August , establishing FTI infrastructure as a pure play for both focused infrastructure business.

Financial adjusted EBITDA for the year came in at $88.1 million from our four segments, up from $58.5 million in 2021. More importantly, during the year, we completed a number of material projects and business developments that should position us for substantial growth in 2023 and the years ahead. All in, we firmly believe that the stage is set for a strong 2023 and continue to target achieving this year a run rate of 200 million of annual adjusted EBITDA from our segments with no additional capital required to meet that target. Folks, on the fourth quarter, adjusted EBITDA.

team at Long Ridge discovered damage to our gas turbine as part of a plan to make the soundage an inspection process. The damage was caused by construction debris that had been left in the turbine's air intake prior to commissioning the plant. The repair process resulted in the power plant being out of service substantially all of the fourth quarter.

All repair costs are covered under warranty, but lost revenue during the quarter resulted in an operating loss to be recorded for the quarter at Long Ridge. This Long Ridge loss accounted for the bulk of variance and our adjusted EBITDA compared to Q3 of last year.

Away from the event at Longage, we're happy with our accomplishments for the quarter, each of Jefferson, Rapano, and Transstar progressed to respective business plans, and we believe we are very well positioned for a solid 2023 ahead. Slide four, briefly on the balance sheet, we have ample liquidity today, and during the quarter, we put in place a new $50 million revolving credit facility at Transstar. Barvings into the Transstar facility may be used upon growth projects at Transstar, and also provide working capital to the holding company if desired.

In the aggregate, we had 1.2 billion of debt shown on the balance sheet at December 31, 473 million of which is issued at our holding company in approximately 700 million is issued at Jefferson on a non-recourse basis. As we have said in the past, we view the Jefferson debt more as an asset than a liability with extremely low interest cost, average maturity of 14 years, the flexibility to pay dividends from Jefferson with excess cash flow, and not callable in the event of a sale. The Jefferson debt is a very high interest cost, average maturity of 14 years, the flexibility to pay dividends from Jefferson with excess cash flow, and not callable in the event of a sale.

That will become increasingly relevant as we anticipate Jefferson generating need and forecast flow in 2023 in the years ahead, now that the new X on contract has commenced and we continue to see momentum down in BOMA. On slide five of the earnings supplement, for each of our segments, we provide our reported 2022 Adjusted EBITDA as well as our annual targets. In the aggregate, we continue to target annual Adjusted EBITDA in excess of 200 million. The target shown for each segment on the slide represent our expectation for annual run rate EBITDA to be achieved with this.

initiatives and third-party revenue to kick in starting in 2023. Jefferson continued to increase utilization of its now 6.2 million barrel capacity terminal. We recently closed on the acquisition of an additional several hundred acre site in Beaumont that we expect a result in highly creative new developments in the years to come. The impact of this new site, Jefferson South, are not included in our $80 million EBITOT target for Jefferson. So any income generated would be incremental.

on each of our four core businesses.

Starting with Transstar Enslide 6 of the Supplement. Transstar posted revenue of 150 million and adjusted EBITDAF 64.3 million in fiscal 2022 are first full year since acquiring the business in August of 2021. Cacheal for the year was 66.7 million in excess of adjusted EBITDAF's proceeds from non-corathlet sales more than

also included approximately 1.5 million of non-cash losses in connection with the sale of excess equipment. Excluding the impact of the idle blast furnace and the loss on asset sales, transdars results would have been in line with those reported for the third quarter of 2021. We're making very good progress on multiple initiatives to transd start a driving committal revenue in EBITDA. These programs, which are detailed on flights seven of the supplement, represent approximately 30 million of incremental EBITDA opportunities annually.

on to Jason to our rail system. We expect 2023 to be a big year for progressing into these initiatives and look forward to reporting our progress in the quarters to come. Now on to Jefferson. Jefferson generated 60.3 million of revenue and 18.5 million of EBITDA in fiscal 2022 compared to 46.4 million of revenue and 10.6 million of revenue.

to be 250,000 barrels per day.

We expect our contract to generate approximately 20 million of incremental EBITDA annually as we ramp up throughput volume in line with the blade expansion ramp up. Secondly, during the quarter we acquired an additional property in Beaumont to provide additional real estate for expansion and growth. We're seeing multiple opportunities for the storage, translating export of renewable fuels and hydrogen-based products. And with Jefferson Yearingfold, build out this site is an ideal extension for our business. We're seeing multiple opportunities for our business.

We expect this new addition, which we refer to as Jefferson South, to contribute incremental EBITDA as early as this year, and to ultimately represent up to 50 million of opportunity incrementally. Back in the main terminal to reach our targets, we're focused on capacity utilization. As we continue to ramp up capacity and meaningful portion of incremental revenue drops to the bottom line as we leverage fixed costs to Jefferson.

As shown on slide 9, we estimate that after including the minimum commitments only from the new X on contract, we will have capacity in place to more than double our volume and revenue. We expect a portion of this remaining capacity to be taken up from X on business in excess of the contracted minimums as the blade expansion ramps up over the next several months, and the rest represented by multiple customers and products we are in active discussions with.

By the way, we expect the X, we, we, and X on both expect the ramp up of blade to occur approximately in early April . Shitting the slide 10 of Rapano, we executed a multi-year contract in Q4 to translate natural gas liquids using our phase one system. The contract, which is with one of the world's leading trading companies, commences on April 1 of this year and has multi, as a multi-year term, with minimum volume commitments. With this contract in hand, Rapano's position to generate stable cash flows.

While we focus on securing business for our larger Phase 2 Translating System. As detailed on slide, 11 of the supplements are Phase 2 systems that are expected to materially increase our storage and throughput capacity when it comes online in a couple of years. In the aggregate, we expect Phase 2 to represent an excess of 40 million of annually that does once complete. We have demand for multiple international off takers and our goal is to enter into long-term agreements with multiple parties in the coming months. Finally, moving on to the long-rage. Long-rage generated Phase 2 Translating System.

I can ultimately drive up to 150,000 MMB2U per day with first production commission this year. Even a currently lower gas prices that equates to approximately five million of incremental monthly ebit for long-rage.

We expect to finance the capital expenditures required to develop gas production with additional debt at long-rage and currently our discussions with multiple lenders.

We expect new light technologies to commence construction in the coming months on its new facility built on Long Ridge property which will produce carbon negative and buyer-degradable plastic products from natural gas. Long Ridge will sell power and natural gas to New Light as well as provide land under a long-term lease. In addition, we expect to be an investor in the project of certain conditions or met.

And finally, we continue to progress efforts to be named one of four national hydrogen hubs under the Department of Energy's program to stimulate clean hydrogen production and use in key markets. Of the 79-party submitting applications initially, Longreach has been shortlisted as an encouraged applicant to advance to the next round with updated applications due in April .

While it's longer term process, we believe the ultimate outcome of being selected as a hydrogen hub could be tremendous. Up to $8 billion of grant funds will be made available to recipients, potentially bringing significant new developments at long-range. Our plan is to first and America to blend hydrogen as fuel, and we believe we are well positioned to receive hydrogen hub designation and benefit from access.

to federal grant funding to develop additional behind-the-meter customers. With that, let me turn the call back over to Alan. Thank you, Ken. Michelle, you may now open the call to Q&A. Thank you. If you'd like to ask a question, please press star 11. If your question has been answered, and you'd like to remove yourself in the queue, please press star 11 again. Our first question comes from Juliano Ballona. With Compat Point, your line is open. Good morning. And we'll have our first question.

take this on a massive asset basis just to make it a little easier. Starting off with Transstar, I'm curious which Blast furnace were down in the quarter and then when they started to come back online. Yep. At the Mon Valley, it was a Blast furnace at the Mon Valley complex.

They have two blast furnaces in Mon Valley and more up at Gary, but two blast furnaces, one was down, so you get a sense for the impact it had with steel production at the Mon Valley complex. One was down toward the duration of the fourth quarter. It came back online in January . I came to provide a specific date, but it came back online in January . And it's been running at comparable pace from where it was prior to the fourth quarter. So it was one of the two blast furnaces in the Pittsburgh.

third-party customers to either diversify away from TransDurring. I think we're going to make a lot of progress in the quarters ahead in that effort.

You're really good. I'm curious, you know, where you are in the, you know, in the very stages of ramping up or launching those initiatives and then how fast, you know, the trajectory of ramping up to about 30 million, even that could happen over the next few quarters.

Yep. You know, it's...

I would say it's sort of a balance. I can't say in any one initiative where, you know, ahead of another initiative, probably proceeding a little bit more quickly with third-party customers. We'll be opening more trans-loading facilities, you know, in the quarters to come. Typically, the real estate development component is a little bit more lumpy and can take a little bit more time. You can be a little bit more...

we should be there possibly in the second quarter or other watching third quarter. That's great. And maybe shift to language. I'd be curious if we could talk a little more about what happened with the turbine. Then the floor. Yep. No, I'm glad you asked.

You know, it's a large, complicated power plant, and when construction was completed, you know, there was material left behind. And when the power plant was turned on, that material was essentially sucked into the turbine and resulted in damage to the gas turbine.

At the end of the day, without speaking out of school, that's obviously not supposed to happen. And I'm not permitted to talk broadly about where we may go with this, but suffice to say.

In our position as we certainly have recourse and we're keeping our options open as to relates to you know the counterparties who work with us on constructing the facility at Longrage. Look I think the biggest the most important thing is it's it's it's fixed you know it's it's in the real beauty mirror Longrage is doing great in January February and you know we expect to continue to do incredibly well we got a ton going on.

That's great. I'm curious, you know, on the long run side, you know, I'm like, what does it mean to be, you know, detonators? I haven't been able to just try to get a sense of like what that could mean for a contribution or an impact. I mean, it's, yeah, it's, it's not in our plan, of course. I think it would all be incremental to.

you know, our expectations, but materially incremental. There will be four applicants ultimately awarded, you know, just under 80, originally applied. They're down to a short list of, I think, just more than 30. After April's applications go in, they're going to cut that short list down to less than 10.

and sometime later this year, you know, for maybe a couple more, we'll be designated as hydrogen hubs. But we've got great partners, we're not applying on our own, we've got a couple of partners, very big names who are applying with us.

It's up to $8 billion of total grant funds that will be awarded. Obviously that's extremely significant. We have a significant amount of ample land for carbon capture projects that could benefit from that grant funding.

So, you know, it's this year's business in terms of the designation, in terms of what it means and when, you know, it's probably a couple of years to build out facilities with those grant proceeds. But we're excited about it. I think we're really well positioned. That's right. And then, yeah, putting it over to Jefferson.

I'd be curious about the ramp up of the bladed refinery extension and down in the end how that thing gets full contribution. And then maybe the flow beyond that kind of other initiatives underway, kind of how do the margins work with any incremental volumes to get closer to the 80 million member? Yep, yep. Well, I mean the contract commenced January 1. You know, the blade expansion, the sequencing with precision of the commencement of the contract and the 100% completion of the grant of the blade expansion was not a perfect science.

The Blanics Manager is coming online during this quarter and it will be online in full, fully ramped up. We expect that they're set on April 1st. You know, it's a $2 billion project, you know, 4x on it. So I suspect that for this quarter volumes, you know, and payments will be closer to the minimums, the committed minimums in the X on contract, and then as we transition into the second quarter, you know, in excess of the contract and in line with...

Our expectations look, it's a 30-40-50 year life project. So it's a big deal. It's huge for us. It's huge for XON where we're excited about it. But like all infrastructure projects, the timing of complete ramp up is not a perfect science. I think it will continue to ramp up this quarter and then we'll be ramped up as we swing into 2-2. That's right. And then on the website, I'm just curious if you can just use the new contract. Yes. I think it's a design there.

It is hopefully the first of additional business with this party and other parties. The contract is a multi-year contract, as I said, with a major trading firm, for the transloading of butane and ultimate export of the project of the product.

It does not use the entire capacity of Phase 1, so there is additional capacity and the team down and down in southern New Jersey is working hard to continue to increase capacity utilization of Phase 1. I would say it uses maybe 50 to 65 percent of our capacity. What we like about the contract is it's just a stable cash flow, we'll generate profits. It basically will hit our $10 million target just with what we have in hand. It allows us now to really proceed and focus all of our attention on Phase 1.

with tax exempt debt borrowings and we have everything set up to be able to hit the market on that. Obviously, the financing will only look more attractive with long-term commitments, you know, in hand. But look, I think the contract for Phase I that we executed during the fourth quarter is great to have. It's something that will result in more consistency and stability.

in Revenue and Casuala Rapano during the remainder of 2023. It doesn't kick in until April 1st, so we won't see much of that in the first quarter, but starting in the second quarter, we'll see the benefits of that contract. That sounds good. And just going back to the point you just made about on the permanent side, I just curious, is that the permanent for the underground cavern? I'm sound like you're saying, you guys are pretty much there. I mean, can you start?

You're going to show the way. Do you have a plus one to remove them? Yep. The, um, no. What is permitted is new dock, uh, above ground storage tank, and additional rail construction. What is incremental to face to is the below ground caverns, which is, which is massive. That is not yet permitted. The permitting's underway. It should be completed in a couple, I don't know, a few months. Um, but it's a process. Um, the,

I think in the deck we talk about phase two on our expectations for approximately $40 million of incremental EBITDAQ contribution. That EBITDAQ contribution does not include the impact of any caverns. The caverns are important and it's a big area of focus for our team, but any revenue in EBITDAQ from the caverns would be incremental to the $40 million. The $40 million is just for the above ground storage facilities, dock and what-have-you. So everything's permitted except for the caverns. We're in the application process with the states.

DEP and I think that's got a few more months to go. That's great. I think that touched on pretty much everything across the atmosphere so I really appreciate the time there and I'm going to come back and keep. Thank you very much. Thank you. There are no further questions at this time. I like to turn the call back over to Alan for closing remarks. Thank you all.

for participating in today's call. We look forward to updating you again after Q1. Ladies and gentlemen, this does include the program, and you may now disconnect. Everyone, have a great day.