Q1 2024 FTAI Infrastructure Inc Earnings Call

Operator: Good day, and thank you for standing by. Welcome to the Q1 2024 FTAI Infrastructure Earnings Conference Call. At this time, all participants are in 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 that 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 Andreini, Investor Relations, please go ahead.

Good day and thank you for standing by welcome to the Q1 'twenty 'twenty four F. T E I infrastructure earnings conference call.

At this time all participants are in a listen only mode.

After the Speakers' presentation, there will be a question and answer session to ask a question. During this session you will need to press star one on your telephone you will then hear an automated message advising your hand, just raised to withdraw your question. Please press star one 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 then Draney Investor Relations. Please go ahead.

Alan John Andreini: Thank you, Jeanne. I would like to welcome you all to the FTAI Infrastructure First Quarter 2024 Earnings Call. Joining me here today are Ken Nicholson, the CEO of FTAI Infrastructure, and Scott Christopher, 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 the call is open to the public in a listen-only mode and is being webcast.

Alan Draney: Thank you T D I would like to welcome you all to the infrastructure first quarter 2024 earnings call. Joining me here today are Ken Nicholson, the CEO of it infrastructure.

Alan Draney: Scott Christopher at the company's CFO, we have posted an investor presentation in our press release on our website, which we encourage you to download if you have not already done. So also please note. This call is open to the public in listen only mode and is being webcast.

Alan Draney: In addition, we will be discussing some non-GAAP financial measures during the call today, including adjusted EBITDA The reconciliation.

Alan Draney: Those measures to the most directly comparable GAAP measures can be found in the earnings supplement.

Alan John Andreini: 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 statements regarding future earnings. These statements, by their nature, are uncertain and may differ materially from actual results.

Scott Christopher: 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.

Alan John Andreini: 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. Okay, thank you very much, Alan, and good morning, everyone.

Scott Christopher: 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.

Scott Christopher: In our quarterly report filed with the SEC now I would like to turn the call over to Ken.

Kenneth J. Nicholson: This morning, we will be discussing our financial results for the first quarter of 2024, and in doing so, I'll be referring to the earnings supplement, which we recently posted on our website. Before getting into the financials, I'm pleased to report that our board has authorized a $0.03 per share quarterly dividend to be paid on May 29th to the holders of record on May 17th. Now, on to the results.

Kenneth J. Nicholson: Okay. Thank you very much Alan and good morning, everyone. This morning, we will be discussing our financial results for the first quarter of 2024 and in doing so I'll be referring to the earnings supplement, which we recently posted to our website.

Kenneth J. Nicholson: Before getting into the financials I'm pleased to report that our board has authorized a <unk> <unk> per share quarterly dividend to be paid on may 29 to the holders of record on May 17.

Kenneth J. Nicholson: First quarter adjusted EBITDA prior to corporate expenses came in at $37.2 million, up 24% from the first quarter of 2023 and largely in line with EBITDA for the fourth quarter of 2023 when you exclude the impact of several one-time items that are related to Jefferson Terminal. Our performance for the quarter was driven by continued strength in Transtar, our biggest cash flow generator, and steady operations at Longridge, while Jefferson results were impacted by a longer-than-expected maintenance overhaul at the Motiva refinery, which I'll talk more about shortly.

Kenneth J. Nicholson: Now onto the results first quarter adjusted EBITDA prior to corporate expenses came in at $37 2 million up 24% from the first quarter of 2023 and largely in line with EBITDA for the fourth quarter of 2023, when you exclude the impact of several one time items out of Jefferson terminal.

Kenneth J. Nicholson: Our performance for the quarter was driven by continued strength in transtar, our biggest cash flow generator and steady operations at long Ridge, well Jefferson results were impacted by a longer than expected maintenance overhaul at the Motiva refinery, which I'll talk more about shortly.

Kenneth J. Nicholson: Looking forward, we expect Q2 to demonstrate continued momentum across our companies as a result of new business wins and multiple initiatives which we implemented last year. We continue to forecast generating in excess of 200 million of run-rate EBITDA during 2024.

Kenneth J. Nicholson: Looking forward, we expect Q2 to demonstrate continued momentum across our companies as a result of new business wins and multiple initiatives, which we implemented last year.

Kenneth J. Nicholson: We continue to forecast generally in excess of $200 million of run rate EBITDA during 2024.

Kenneth J. Nicholson: In terms of the highlights at each segment, TramStar posted $21.7 million of adjusted EBITDA, generating new records in each of car loads, average rates, and revenue. Operationally, Transtar had an excellent quarter and would have posted record EBITDA after adjusting for fuel surcharge timing and the receipt of 45G tax credits, which hit the P&L only in the fourth quarter of each year. Pricing increases and several new business activities, including our new rail car repair facility, have already begun to contribute in 2024, so we expect momentum to continue with TranStar in the year to come. At Jefferson, EBITDA was $6.8 million for the quarter, reflecting the 45-day maintenance overhaul at the Motiva refinery. Had Motiva operations stayed steady, we estimate EBITDA would have exceeded $10 million in Q1.

Kenneth J. Nicholson: In terms of the highlights of each segment Transtar posted $21 7 million of adjusted EBITDA generating New records in Egypt, carloads average rates and revenue.

Kenneth J. Nicholson: Operationally transfer had an excellent quarter and would've posted record EBITDA after adjusting for fuel surcharge timing and the receipt of 45 tax credits, which hit the P&L only in the fourth quarter of each year.

Kenneth J. Nicholson: Pricing increases in several new business activities, including our new railcar repair facility have you already begun to contribute to.

Kenneth J. Nicholson: 2024, so we expect momentum to continue a trend starting the year to come.

Kenneth J. Nicholson: At Jefferson EBITDA was $6 8 million for the quarter, reflecting a 45 day maintenance overhaul at the Motiva refinery.

Kenneth J. Nicholson: Makita operations stayed steady we estimate EBITDA would've exceeded $10 million in Q1.

Kenneth J. Nicholson: With the outage behind us, Jefferson operations are more active than ever, and the most recent month of April has posted record volumes and revenues, putting us on pace to post record results in Q2. At Rapano, we made significant progress on our Phase 2 expansion project that will transform our business and long-term EBITDA generation. And finally, at Longridge, results reflect consistent operations at a 98% capacity factor as well as reduced third-party gas sales given the lower price environment for natural gas.

Kenneth J. Nicholson: With the outage behind Us Jefferson operations are more active than ever in the most recent month of April has posted record volumes and revenue is putting us on pace to post record results in Q2.

Kenneth J. Nicholson: At <unk>, we made significant progress on our phase two expansion project that will transform our business and long term EBITDA generation and finally at long Ridge results reflect consistent operations at a 98% capacity factor as well as reduced third party gas sales given the lower price environment for natural gas, we continue to be extremely optimistic.

Kenneth J. Nicholson: We continue to be extremely optimistic about our prospects at Longridge, particularly for AI data center demand, and believe the opportunity for creating substantial value from behind the meter customers is stronger than ever. On the balance sheet, total debt of $1.3 billion at March 31 was unchanged from last quarter.

Kenneth J. Nicholson: Our prospects of long ridge, particularly for AI data center demand and believe the opportunity for creating substantial value from behind the meter customers is stronger than ever.

Kenneth J. Nicholson: Briefly on the balance sheet total debt of $1 3 billion at March 31 was unchanged from last quarter $562 million of that was at the corporate level, while the rest of our debt was that our business units.

Kenneth J. Nicholson: $562 million of debt was at the corporate level, while the rest of our debt was at our business units. Transtar continued to be completely debt-free, while approximately $753 million of debt was at our Jefferson segment and $50 million was at Rapano. This week, we plan to launch a new debt financing at Jefferson with proceeds used to refinance a portion of our existing debt coming due next year and to finance the construction of dock improvements at our new Jefferson South site in connection with the long-term clean fuels contract we signed last year.

Kenneth J. Nicholson: Transtar continues to be completely debt free while approximately $753 million of that was at our Jefferson segment and $50 million was that Mcconnell.

Kenneth J. Nicholson: This week, we plan to launch a new debt financing at Jefferson with proceeds used to refinance the portion of a portion of our existing debt coming due next year and to finance construction of dock improvements at our new Jefferson South site in connection with the long term clean fuels contract, we signed last year importantly, as part of the upcoming Jefferson financing we also.

Kenneth J. Nicholson: Importantly, as part of the upcoming Jefferson financing, we also plan to incorporate a tender offer for some of our existing debt, allowing us to opportunistically take advantage of the embedded discount and some of our outstanding tax exempt bonds, which carry lower coupons. If successful, the tender offer will enable us to reduce our aggregate debt balance in a cash flow-neutral manner, ultimately increasing the equity value of Jeff. We expect the financing to be on the market over the next couple of weeks and to close in late May or early June.

Kenneth J. Nicholson: Turning to incorporate a tender offer for some of our existing debt, allowing us to opportunistically take advantage of the embedded discounts and some of her outstanding tax exempt bonds, which carry lower coupons success.

Kenneth J. Nicholson: If successful the tender offer will enable us to reduce our aggregate debt balance and a cash flow neutral manner ultimately increasing the equity value of Jefferson, we expect the financing to be in the market over the next couple of weeks and close in late May or early June.

Kenneth J. Nicholson: I'll now talk through the detailed results for each of our segments and then I'll turn it over to questions. Starting with TranStar on slide 7 of the Supplement, TranStar posted record revenue of $46.3 million and adjusted EBITDA of $21.7 million in Q4, compared with revenue of $44 million and adjusted EBITDA of $23.6 million in Q4. Car load volumes, average rate per car, and total revenue all came in at new records in the quarter.

Kenneth J. Nicholson: I'll now talk through the detailed results at each of our segments and then I'll plan to turn it over to questions starting with Transtar on slide seven of the supplement transfer posted record revenue of $46 3 million and adjusted EBITDA of $21 7 million in Q4, compared with revenue of $44 million and adjusted EBITDA of $23 6 million in Q4.

Kenneth J. Nicholson: Carload volumes average rate per car and total revenue all came out of new records in the quarter fuel expenses were slightly higher versus Q4 last year, given the typical lag and fuel surcharges that we received in Q4, we also experienced lower expenses versus this Q1 due to the impact of these 40 <unk> tax credit.

Kenneth J. Nicholson: Fuel expenses were slightly higher versus Q4 last year given the typical lag in fuel surges that we received. However, in Q4 we also experienced lower expenses versus this Q1 due to the impact of these 45G tax credits, which hit our P&L in a positive way in Q4 every year as opposed to being spread over the entire year. Had fuel expense and the tax credit dynamic been consistent with Q4, our first quarter EBITDA would have been another record result.

Kenneth J. Nicholson: Which hit our P&L in a positive way in Q4 every year as opposed to being spread over the entire year had fuel expense and the tax credit dynamic bedding consistent with Q4, our first quarter EBITDA would have been another record result.

Kenneth J. Nicholson: We're making great progress on our various initiatives to drive incremental revenue and diversify our customer base. On June 1st, we will commence a lease with Norfolk Southern for a 41-mile extension of TranStar's current East Ohio Valley Railroad.

Kenneth J. Nicholson: We're making great progress on our various initiatives to drive incremental revenue and diversify our customer base on June 1st we will commence a lease with Norfolk Southern for 41 mile extension of train starts current East, Ohio Valley Railroad.

Kenneth J. Nicholson: The extension provides TranStar with additional commercial opportunities that have the potential to contribute meaningful EBITDA in the near to midterm. We expect these new opportunities, together with similar ones at other trans-star railroads, to represent approximately $4-6 million of quarterly EBITDA, or $20 million on an annualized basis. Now on to Jefferson. Jefferson generated $18.6 million of revenue and $6.8 million of adjusted EBITDA in Q1 versus $19.3 million of revenue and $14.3 million of EBITDA in Q4. During the quarter, Motiva undertook a 45-day maintenance overhaul of its large crude distillation unit and coker. The result was a temporary reduction in crude throughput at Jefferson, driving lower volumes and revenue during the overhaul.

Kenneth J. Nicholson: <unk> provides <unk> with additional commercial opportunities, which have potential to contribute meaningful EBITDA in the near to midterm.

Kenneth J. Nicholson: We expect these new opportunities together with similar ones that other transtar railroads to represent approximately $46 million of quarterly EBITDA or $20 million on an annualized basis.

Kenneth J. Nicholson: Now on to Jefferson Jefferson generated $18 $6 million of revenue and $6 8 million of adjusted EBITDA in Q1 versus $19 $3 million of revenue and $14 $3 million.

Kenneth J. Nicholson: EBITDA in Q4.

Kenneth J. Nicholson: During the quarter Motiva undertook the 45 day maintenance overhaul of its large crude distillation unit and Coker. The result was a temporary reduction in crude throughput at Jefferson driving lower volumes and revenue during the overall.

Kenneth J. Nicholson: Had it not been for the turnaround, quarterly EBITDA would have exceeded Q4 when adjusting for Jefferson's Q4 gain on sale. By the end of the quarter, throughput volumes to Motiva returned to normal, and we saw record volumes of over 200,000 barrels per day in the month of April, a new monthly record putting us on pace for a record 2Q. More importantly, the new business environment at Jefferson remains robust, and we are advancing more opportunities for both conventional energy products as well as clean hydrogen-based fuels.

Kenneth J. Nicholson: Not been for the turnaround quarterly EBITDA would have exceeded Q4, when adjusting for Jeff since Q4 gain on sale by the end of the quarter throughput volumes to my Tivo returned to normal.

Kenneth J. Nicholson: And we saw record volumes.

Kenneth J. Nicholson: Over 200000 barrels per day in the month of April a new monthly record of putting us on pace for a record two two.

Kenneth J. Nicholson: More importantly, the new business environment at Jefferson remains robust and we are advancing more opportunities for both conventional energy products as well as clean hydrogen based fuels. In addition to the new 15 year contract for the trans loading and export of ammonia commencing in 2025, we made good progress on three additional projects in advanced negotiations.

Kenneth J. Nicholson: In addition to the new 15-year contract for the transloading and export of ammonia, commencing in 2025, we made good progress on three additional projects and advanced negotiations, which together with last year's ammonia contract represent approximately $75 million of annual EBITDA and will be transformational for Jeffery. As we said last quarter, if we're successful in converting these opportunities to business wins, we will far exceed our prior targets of $80 million of annual EBITDA. Briefly, I'm Napano.

Kenneth J. Nicholson: <unk>, which together with last year's ammonia contract represent approximately $75 million of annual EBITDA and will be transformational for Jefferson as we said last quarter. If were successful in converting these opportunities to business wins, we will far exceed our prior target of $80 million of annual EBITDA.

Kenneth J. Nicholson: With Phase 1 operations continuing, our negotiations are nearly complete in connection with our larger Phase 2 transloading system. We expect Phase 2 to quadruple the capacity of natural gas liquids handled at the terminal. I'm confident we'll sign up our first customer for Phase 2 here in the second quarter and start construction immediately thereafter. In the aggregate, we expect Phase 2 to cost approximately $200 million to build, funded entirely with tax-exempt debt, and to generate approximately $40 million of annual EBITDA once complete.

Kenneth J. Nicholson: Briefly on the panel with phase one operations continuing our negotiations are nearly complete in connection with our larger phase II translating system.

Kenneth J. Nicholson: We expect phase II to quadruple the capacity of natural gas liquids handled at the terminal I'm confident we'll sign up our first customer for phase two here in the second quarter and start construction immediately thereafter in the aggregate, we expect phase two to cost approximately $200 million build funded entirely with tax exempt debt and to generate approximately $40 million of annual EBITDA.

Kenneth J. Nicholson: Closing out with Longridge. Longridge generated 10.4 million in EBITDA in Q1 versus 5.1 million in Q4. Power plant operations were steady at the 98% capacity factor, while gas production continued to be managed down during the quarter in the currently lower gas price environment.

Kenneth J. Nicholson: Once complete.

Kenneth J. Nicholson: In closing I with long ridge longer generated $10 4 million in EBITDA in Q1 versus $5 1 million in Q4 power plant operations were steady at 98% capacity factor while gas production continued to be managed down during the quarter and the currently lower gas price environment remember gas prices of under $1 50 per MD to you our prop.

Kenneth J. Nicholson: Remember, at gas prices of under $1.50 per MMBTU, our profit on third-party sales is less meaningful, so we limit production and opt to keep excess gas in the ground. Most importantly, we've been actively advancing a handful of significant opportunities with on-site power customers at Longreach, which will have a significant positive impact on EBITDA. We continue to be under a letter of intent with the data center developer for the lease of property and utilization of a substantial portion of our power capacity.

Kenneth J. Nicholson: On third party sales is less meaningful so we limit production and opt to keep excess gas in the ground.

Kenneth J. Nicholson: Most importantly, we have been actively advancing a handful of significant opportunities with on site power customers at long Ridge, which will have a significant positive impact on EBITDA.

Kenneth J. Nicholson: We continue under a letter of intent with the data center developer for the lease and property and utilization of a substantial portion of our power capacity. The LOI is a key step towards the execution of what we expect to be a long term binding agreement.

Kenneth J. Nicholson: The LOI is a key step toward the execution of what we expect to be a long-term binding agreement. On a macro level, data center demand in the PJM region alone is projected to go from three gigawatts of power needs currently to nearly 17 gigawatts over the next five to six years. New renewable resources will simply not be sufficient to meet this demand, and owners of modern, efficient gas plants like Longridge have the potential to benefit greatly in the coming years.

Kenneth J. Nicholson: On a macro level data center demand in the PJM region, allowing it's projected to go from three Gigawatts of power needs currently to nearly 17 gigawatts over the next five years to say, here's new renewable resources will simply not be sufficient to meet this demand and owners of modern efficient gas plants like long rates have the potential to benefit greatly in the coming years.

Kenneth J. Nicholson: To wrap up, we're pleased with the quarter and expect you two and the quarters ahead to reflect our continued momentum. I'll turn the call back over to Al. Thank you. Thank you, Ken. Dede, you may now open the call to Q&A. Thank you.

Kenneth J. Nicholson: To wrap up we're pleased with the quarter and expect Q2 and the.

Kenneth J. Nicholson: Quarters ahead to reflect our continued momentum I'll turn the call back over to Alan.

Alan Draney: Thank you. Thank you Kevin Didi you May now open the call to Q&A. Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.

Operator: 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 list. And our first question comes from Giuliano Bologna of Compass Point. Your line is open.

Kevin Didi: And our first question comes from Giuliano Bologna of Compass point Your line is open.

Giuliano Jude Anderes Bologna: Good morning, and it looks like you guys have made a lot of progress on the new initiatives, so that's great to see. As a first question, I'd be curious if you could expand a little more on the Jefferson debt transaction that you were referring to, what you're trying to achieve in terms of capturing the discount, and then what you think you'll end up doing on the back end in terms of new financing to complete that transaction. Good morning, Giuliano.

Giuliano Jude Anderes Bologna: Good morning Akshay.

Giuliano Jude Anderes Bologna: It hasn't been a lot of progress around new initiatives. So.

Giuliano Jude Anderes Bologna: That's great to see.

Giuliano Jude Anderes Bologna: That's the first question.

Giuliano Jude Anderes Bologna: So you can spend a little more on the Jefferson debt transaction that you were referring to what.

Giuliano Jude Anderes Bologna: What you are trying to achieve in terms of you Kathryn the discount.

Giuliano Jude Anderes Bologna: And then.

Giuliano Jude Anderes Bologna: Thank you Heiko end up doing on the backend in terms of new financing to.

Giuliano Jude Anderes Bologna: To complete that transaction.

Heiko: Yeah happy to good morning, Giuliano, yes.

Kenneth J. Nicholson: So, as I said, that's the financing we expect to launch here in the very, very near term, in the next few days. The purpose of the financing is, in part, to refinance and extend maturities on some debt we have coming due next year. But we're certainly going to take advantage of some of the embedded discounts in our existing taxes and bonds. And just to put that in perspective, At Jefferson today, we have a number of tranches of tax-exempt debt that hold coupons that are as low as 1.8 percent.

Heiko: That's a financing we expect to launch here in the very very near term next few days.

Heiko: The purpose of the financing has been part to refinance and extend maturities.

Heiko: And that we have coming through next year, but we're certainly going to take advantage of some of the embedded discount and our existing taxes and bonds and just to put that in perspective.

Speaker Change: Hey, Jefferson today, we have a number of tranches of tax exempt debt holds coupons that are as low as one 8% many of them have a two handle and as a result, those bonds are trading at let's say a market yield of 5% to 6% and a very long duration. They are 20 to 25 years left.

Kenneth J. Nicholson: Many of them have a two-handle. And as a result, those bonds, you know, are trading at, let's say, a market yield of 5 to 6 percent for a very long duration. They have 20 to 25 years, you know, left prior to their maturity, and so they trade at meaningful discounts to par in order to yield 5 or 6 percent. So there's a significant opportunity for us to tender for those bonds at a premium to their current trading level but still at a deep discount to their par amount.

Speaker Change: Prior to their maturity and so they trade at meaningful discounts to par in order to yield five or 6%. So it is a significant opportunity for us to tender for those bonds at a premium to their current trading level, but still at a deep discount.

Kenneth J. Nicholson: So what we'll simply do is issue new debt to raise the proceeds to buy back the old debt at a much lower price. The net effect of it all is zero impact on cash flow at Jefferson but a significant reduction in debt.

Speaker Change: They're they're par amount.

Speaker Change: So what we'll simply do with issuing new debt.

Speaker Change: Two.

Speaker Change: The proceeds to buy back the old debt at a much lower price the net effect of it all is.

Speaker Change: Is zero impact on cash flow at Jefferson, but a significant reduction in debt.

Giuliano Jude Anderes Bologna: You know, depending upon the tender and the results from the tender, we think the amount of the discount that we might be able to capture is somewhere between $75 million and $125 million. That is very helpful. I appreciate that. Yeah, so if you could go over to the long red side. I'd be curious, you know, it seems like there's been a lot of action with data center demand in Ohio, that, you know, Ohio is kind of, you know, taking over for Virginia in terms of being, you know, a little bit of an epicenter for new data center demands as projects move a little further. I'm curious if you're seeing that with the demand for potential data center opportunities behind the meter that fell a long time ago.

Speaker Change: Depending upon the tender and the results from the tender we think the amount of discount that we might be able to capture it somewhere between $75 million and $125 million.

Speaker Change: Okay.

Speaker Change: That is very helpful. I appreciate that.

Speaker Change: Yes.

Speaker Change: Over to the <unk> side.

Speaker Change: I'd be curious.

Speaker Change: It seems like Theres been a lot of action.

Speaker Change: Data center demand in Ohio.

Speaker Change: The Ohio kind of taking.

Speaker Change: Taking over for Virginia in terms of getting.

Speaker Change: A little bit of an epicenter for kind of a new data center demand.

Speaker Change: As far as I can move a little further I'm curious if you're seeing that with the demand.

Speaker Change: For Pennsylvania center opportunities behind the meter that's how long rates.

Kenneth J. Nicholson: We've definitely seen an increase in inbound calls from the ultimate users, you know, some of the big AI companies, as well as the infrastructure companies that develop data centers. I would say we've seen a significant pickup in activity just over the past few months, and we're engaged with multiple parties, which is definitely encouraging and is extremely compelling.

Speaker Change: Yes definitely.

Speaker Change: The increase in the inbound calls.

Speaker Change: From the ultimate users.

Speaker Change: Some of the big AI companies as well as the infrastructure.

Speaker Change: <unk> companies that develop data centers.

Speaker Change: I would say we've seen a significant pickup in activity just over the past few months.

Speaker Change: And where we're engaged with multiple parties, which is definitely encouraging.

Kenneth J. Nicholson: At Longridge today, we produce or generate 485 megawatts of power, and we sell it into the grid today at just under 3 cents per kilowatt hour. So, just to give you a sense of the economic impact of behind-the-meter customers like data centers. We generate just under $0.03 per kilowatt hour of revenue at Longridge. The going rate for AI data centers and the cost of power is about $0.08. So, almost three times what we are generating today.

Speaker Change: I mean, the math I got to say it is.

Speaker Change: As extremely compelling at at long Ridge today, we produce or generate 485 megawatts of power and we sell it into the grid today at just under <unk> <unk> per kilowatt hour. So just to give you a sense of the.

Speaker Change: The economic impact of behind the meter customers like data centers.

Speaker Change: We generally today just under <unk>.

Speaker Change: Per kilowatt hour of revenue at long ridge, the going rates for AI data centers and the cost of power is about eight so almost three times. What we are generating today. There is no material increase in the cost of generation and so you can do the math I mean that is a.

Kenneth J. Nicholson: There is no material increase in the cost of generation, and so you can do the math. I mean, that has a massive impact on EBITDA. EBITDA today is, you know, on an annualized basis just from the power plant, about $80 million. If we get anything close to six to eight cents per kilowatt hour, EBITDA would, you know, double or triple it. So it's a huge opportunity. It's obviously a great macro, strong demand, limited supply. We really like the setup and we like, you know, we like what Longreach has available. So it's a major priority for the company.

Speaker Change: <unk> impact on EBITDA EBITDA today is on an annualized basis, just from the power plant of about $80 million. If we get anything close to six to eight per kilowatt hour EBITDA would double or triple it laundry. So it's a huge opportunity.

Speaker Change: Obviously, a great macro strong demand limited supply and we really like to set up and we like we like what.

Speaker Change: With long Ridge has available so it's a major priority for the company.

Giuliano Jude Anderes Bologna: That's great. And then, shifting over to Jefferson, you obviously have a pretty big pipeline with the 75 million additional opportunities. I'm curious, when I look at those opportunities, are there any specific commodities that you're planning on transloading or focusing on related to new contracts or new opportunities there? Yeah, yeah, yeah.

That's great and then shifting over to Jefferson.

Speaker Change: A pretty big pipeline with the $75 million of opportunities I'm curious when I look at those.

Speaker Change: Are there any specific commodities that you're buying are translating.

Jefferson: We are focusing on with related with new contracts or new opportunities there.

Kenneth J. Nicholson: There are four total contracts. I would say two of them are for conventional fuels, crude oil, and derivatives, and two are for clean fuels. In terms of volumes, the clean fuel contracts are materially more volume. On a percentage basis, we like what it does to Jefferson in terms of the mix of product handle. There is a meaningful shift toward cleaner products, which is generally a good thing. But two of the contracts are for crude oil and crude derivatives. Those are both at our main terminal, and those are new deals with existing customers.

Speaker Change: Yes, yes.

Speaker Change: Therefore, total contracts I would say in terms of the two.

Speaker Change: Two of them are for a conventional fuels crude oil derivatives and two are for clean fuels in terms of volumes the clean fuel contracts are materially more volume.

Speaker Change: So on a percentage basis, we like what it does to Jefferson in terms of the mix of.

Speaker Change: Product handle if there is a meaningful shift toward cleaner and our products, which is generally a good thing.

Speaker Change: But two of the contracts are for.

Speaker Change: Crude and crude derivatives those are both at our main terminal.

Speaker Change: And those are with.

Giuliano Jude Anderes Bologna: Whereas the two contracts at Jefferson South are for clean fuels, carbon-free ammonia, and blue ammonia, and those are with new customers. One contract has been signed at Jefferson South, and the project is progressing pretty rapidly. I think we're a few months away from having that at a point where it's at the final stage, and so we're excited about that. I do think Jefferson South is very promising as a new clean energy hub, but it will be just with this first contract that we've already signed for blue ammonia export. It will be the largest gateway for the export of ammonia, you know, on the Gulf Coast. And so we're excited to get that project going.

Speaker Change: Those are new deals with existing customers, whereas the two contracts at Jefferson south or for clean fuels carbon carbon free ammonia blue ammonia.

Speaker Change: And.

Speaker Change: Those are with new customers one contract has been signed at Jefferson South of the other is.

Speaker Change: Advancing pretty rapidly I think we're a few months away from from having that at a point, where it's at a final stage and so where we're excited about that I do think Jefferson South is very promising as a new clean energy hub.

Speaker Change: It will be just with this first contract that we've already signed for Glu ammonia export it will be the largest gateway for the export of ammonia.

Speaker Change: In the Gulf Coast, and so we're excited to get that project going.

Kenneth J. Nicholson: That's very helpful. And then maybe, it seems to me where Transar, you've obviously been working on, you know, third-party contracts there. I'd be curious, you know, when you originally acquired Transar, what percentage of the business was going from third parties versus now? And then, you know, where do you think that could go by the end of 24?

Speaker Change: Yes.

Speaker Change: That's very helpful.

Speaker Change: Our returns are.

Speaker Change: You've obviously been working on third party contracts there.

Speaker Change: Just curious when you originally acquired trends are what percentage of the <unk>.

Speaker Change: <unk> gone from third parties versus now and then where do you think that could go by the end of 'twenty four.

Giuliano Jude Anderes Bologna: Well, it was largely non-existent when we acquired the company. I mean, it was just not part of Transstar's business to do any work for third parties. This was an internal subsidiary of U.S. Steel that was deeply discouraged from handling or serving any customers not named U.S. Steel.

Well it was it was.

Speaker Change: Largely nonexistent when we acquired the company I mean, it was just not part of transparency business to do any work with third parties. This was this was an internal.

Speaker Change: Subsidiary of USDA that was deeply discouraged from handling.

Speaker Change: Our serving.

Speaker Change: Any customers not named U S steel.

Kenneth J. Nicholson: So it was, you know, single digits of revenue from third parties. Today we're at, I want to say it's somewhere between $22 and $25 million of annual revenue from third parties. Our long-term goal is to triple or quadruple that number. By the end of this year, we should add about $10 million of incremental third-party revenue every year. So by the end of this year, we should be running at about $30 to $35 million in third-party revenue.

Speaker Change: So it was it was single digits.

Speaker Change: Revenue from third parties today, we're at I'm going to say, it's somewhere between $20 million to $25 million of annual revenue from third parties. Our long term goal is to triple or quadruple that number by the end of this year. We added about 10 million of incremental third party revenue every year. So by the end of this year, we should be running at about $30 million to $35 million of third party revenue.

Giuliano Jude Anderes Bologna: That's very helpful. The one thing I was just curious, which is a quick follow-up to make sure I didn't miss it in the prepared remarks, you mentioned the Norfolk Southern 40 mile extension. And I'm curious if you mentioned anything about the potential timeline around that. That was the only thing I was curious about there.

Speaker Change: Yes.

Speaker Change: That's very helpful. I was just curious as a quick follow up.

Speaker Change: I missed it in the prepared remarks, you had mentioned that Norfolk southern.

Speaker Change: 40 extender.

Speaker Change: And I'm curious if you can.

Speaker Change: I think about around the potential timeline around that is the only thing I was curious about there yes, the we take over that track.

Kenneth J. Nicholson: We take over that track. The East Ohio Valley Railroad is a current asset in Transdarts, relatively short, and we connect with the NS, up in Mingo Junction, and we've been negotiating with NS to get, you know, this is not uncommon for class 1s to hand over or lease some of their lower density rail lines to short lines in regional railroads. And so we take over that line actually on June 1st, just in a few weeks, which in and of itself is a good thing it's a it's a minimal operating expense it's almost no rent that we'll be paying with this takeover the line and we'll handle maintenance of the line we're already handling maintenance on the portion of track that obviously we own so that's that's relatively straightforward what's most important is there is a large development opportunity located on the new leased track and we've been negotiating with a counterparty hence the the interest in taking over you know that additional trackage from NS so that we can actually handle the loading of freight and the assembly of trains for then transporting up to Mingo Junction where we'll hand off the trains to North and Southern so excited about it it's been in the works now for several months but it is it is imminent and we'll be taking over that track in the coming weeks

Speaker Change: The East, Ohio Valley Railroad as.

Speaker Change: Current asset and trans starts relatively short.

Speaker Change: <unk>.

And we connect with the NFS.

Giuliano Jude Anderes Bologna: And then one final one, as you discussed, you know, a number of very large central contracts at both Jefferson and Rapano, and I'm curious if you know the types of contracts that you're actually getting are large enough to be, you know, 8k events or press release events. Yeah.

Speaker Change: Upping Mango junction.

Speaker Change: <unk>.

Speaker Change: We've been negotiating with NFS to get this is not uncommon for class ones to handover release.

Speaker Change: Some of their lower density rail lines to two short lines and regional railroads and so we take over that line.

Speaker Change: Actual engine first just in a few weeks.

Speaker Change: Which ended up itself is a good thing it's a it's a minimal operating expenses almost no rent that will be paying will just take over the line and we'll handle maintenance of the line were already handling and maintenance on the portion of track that obviously, we own. So that's that's relatively straightforward. What's most important is there is a large development opportunity.

<unk> located on the new leased track and we've been negotiating with the counterparty, hence the interest in taking over that additional trackage from NFS. So that we can actually handle the loading of freight in the assembly of trains four than transporting up to May go junction will hand off the trends too.

Speaker Change: Norfolk, Southern so excited about it it's been.

Speaker Change: It works now for several months.

But it is it is eminent and will be taking over that tracked in the coming weeks.

Speaker Change: That's very helpful and then one.

Speaker Change: One final one.

Speaker Change: You discussed.

Speaker Change: A number of very large central contracts at.

Speaker Change: But 10% of our panel.

Speaker Change: I am curious if.

Speaker Change: The types of contracts that you're exiting are large enough.

Kenneth J. Nicholson: Yeah, yeah, generally wait until the quarter to announce those types of things. I think there are a handful of these projects that are meaningful enough to probably give rise to, you know, reporting them intra-quarter by way of a press release and 8K.

Speaker Change: B K events, our press release events, yes.

Speaker Change: Yes, generally wait until the quarter to announce those types of things I think there are a handful of these.

Speaker Change: These projects that are meaningful enough to probably give rise to reporting them.

Kenneth J. Nicholson: I think it's just a combination of the size of the transactions and the duration. Certainty with minimum volume commitments, which all of our contracts have today and all the contracts we're negotiating will have. So I do think it's likely that, you know, as it relates to some of the projects I described earlier, I think it's more likely we'll issue a press release upon execution of those agreements because they're material enough to do so.

Speaker Change: Intra quarter by way of a press release and 8-K.

Speaker Change: I think it's a combination of the size of the transactions men and the duration the certainty with.

Speaker Change: Minimum volume commitments, which all of our contracts have today and all the contracts. We're negotiating will have so I do think.

Speaker Change: I do think it's likely that as it relates to some of the projects I described.

Speaker Change: Earlier, I think it's more likely we'll we'll make a we'll issue a press release upon execution of those agreements because they are they are material enough to do so.

Giuliano Jude Anderes Bologna: That's very helpful. I appreciate it, and I will jump back in the queue.

Speaker Change: That's very helpful. I appreciate it and I will jump back in the queue.

Alan John Andreini: Thank you. This concludes our Q&A session. I'd now like to turn it back to Alan Andreini for closing remarks.

Speaker Change: Thank you.

Speaker Change: Thank you. This concludes our Q&A session I would now like to turn it back to Alan Andreini for closing remarks.

Alan John Andreini: Thank you, DeeDee, and thank you all for joining us today. We look forward to updating you after Q2.

Alan John Andreini: Thank you <unk> and thank you all for joining US today, we look forward to updating you after Q2.

Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.

Alan John Andreini: Yes.

Speaker Change: This concludes today's conference call. Thank you for participating and you may now disconnect.

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