Q3 2025 FTAI Infrastructure Inc Earnings Call

Good day, and thank you for standing by. Welcome to the Q3 2025 FTI, infant structure earning 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 this session. You will need to press star 1, 1 on your telephone. You will then hear an automated message advising you. Your hand is raised to withdraw your question. Please press star 1 1 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 Andre.

Alan Andreini: Thank you, Michelle. I would like to welcome you all to the FTAI Infrastructure Inc. earnings call for the third quarter of 2025. Joining me here today are Ken Nicholson, the CEO of FTAI Infrastructure Inc., and Buck Fletcher, the company's CFO. We have posted an investor presentation and our press release on our website, which we encourage you to download if you have not already done so. Also, please note that this call is open to the public in listen-only mode and is being webcast. In addition, we will be discussing some non-GAAP financial measures during the call today, including adjusted EBITDA. The 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 regarding future earnings.

Investor relations. Please go ahead, sir.

Thank you, Michelle. I would like to welcome. You all to the ftai infrastructure. Earnings call for the third quarter of 2025 joining me here today are Ken Nicholson, the CEO of FTI, infrastructure and buck Fletcher the company's CFO.

We have posted an investor presentation and our press release on our website, which we encourage you to download if you have not already done. So also, please note that this call is open to the public. And listen, only mode and is being webcast, in addition, we will be discussing some non-gaap Financial measures during the call today including adjusted Eva. The reconciliation of those measures to the most directly comparable. Gaap measures can be found in the earnings supplement.

Alan Andreini: 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 the 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.

Ken Nicholson: Thank you, Alan. Good morning, everyone. Welcome to our earnings call for the third quarter of 2025. As we typically do, we'll be referring to the earnings supplement, which you can all find posted on our website, and I will get right into it by kicking things off on page three. The quarter was an extremely active one. In our rail segment, we closed on the acquisition of the Wheeling and Lake Erie Railway, a transformative transaction in many ways and expected to be one that sets the stage for significant growth in our rail segment in the quarters to come. Also, during the quarter at Long Ridge, we commenced gas production in West Virginia, and we're now producing in excess of 100,000 MMBTU per day, well above our power plant's consumption. Most importantly, the company delivered strong financial performance.

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. The 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 the forward-looking statements and to review the risk faster. Contained in our quarterly report filed with the SEC. Now, I would like to turn the call over to Kim.

Thank you, Alan, and good morning everyone, Welcome to our earnings call, for the third quarter of 2025. As we typically do, we'll be referring to the earnings supplement, which you can all find posted on our website. And I will get right into it by kicking things off on page 3.

The quarter was extremely active, and in our rail segments, we closed on the acquisition of the Wheeling and Lake Erie Railway. A transformative transaction in many ways and expected to be significant. That sets the stage for considerable growth in our rail segments in the quarters to come.

Above our power plants, consumption.

Ken Nicholson: Adjusted EBITDA for the quarter was $70.9 million, up 55% from $45.9 million last quarter, and nearly double adjusted EBITDA year over year. Importantly, the reported figures reflected only five weeks of contribution from the Wheeling, which we closed into a voting trust on August 25, and just under five weeks of contribution from West Virginia gas production. Our results for Q4 and going forward will reflect these activities entirely. We expect the reported results to continue to grow in the periods ahead. The events of the third quarter, together with agreements in place at our Jefferson and Repauno segments, put us in a position to generate in excess of $450 million of adjusted EBITDA on an annual basis, excluding any organic growth or new business wins. On the right side of slide three, we break down the components of that target, and I'm going to walk through it briefly.

And most importantly, the company delivered, strong financial performance adjusted ebita for the quarter was 70.9. Million up 55% from 45.9 Million last quarter and nearly double adjusted. Eva year-over-year importantly, the reported figures reflected only 5 weeks of contribution from the Wheeling which we closed into a voting Trust on August 25th and just under 5 weeks of contribution from West Virginia, gas production our results for Q4 and going forward will reflect these activities entirely. So we expect the reported results to continue to grow in the periods ahead.

The events of the third quarter, together with agreements in place at our Jefferson and Repauno segments, put us in a position to generate an excess of $450 million of adjusted EBITDA on an annual basis, excluding any organic growth or new business wins.

Ken Nicholson: First, for purposes of the bar chart, we have adjusted our reported results to reflect the Wheeling acquisition and West Virginia gas production as if they had both occurred at the beginning of the quarter. Next, once approval is received to release the Wheeling from the voting trust, we have confidence in approximately $20 million of annual savings through realizing economies of scale. Finally, we add the financial impact of agreements in place at Jefferson and Repauno, which will commence revenue service at various points between now and the end of next year. I will note that our $460 million annual target excludes several important opportunities, including a number of meaningful new revenue opportunities on the combined Transstar Wheeling platform, behind-the-meter developments at Long Ridge, or any further activities at Jefferson and Repauno. Flipping to slide four, I'll briefly touch on the highlights at each segment.

On the right side of uh slide 3. We break down the components of that Target and I'm going to walk through it briefly.

First, for purposes of the bar chart, we have adjusted our reported results to reflect the Wheeling acquisition and West Virginia gas production as if they had both occurred at the beginning of the quarter. Next Once approval is received to release the Wheeling from the voting trust. We have confidence in approximately 20 million of annual savings through realizing economies of scale.

And finally, we add the financial impact of agreements in place at Jefferson repauno which will commence Revenue, Service at variance points between now and the end of next year, I will note that our 460 million annual Target excludes several important opportunities, including a number of meaningful, new Revenue opportunities on the combined tranzstar, Wheeling platform behind the meter developments at Long Ridge or any further activities at Jefferson and repauno.

Ken Nicholson: At our rail segment, adjusted EBITDA was $29.1 million, which included $8.4 million attributable to the Wheeling for the five weeks we owned the company. On a standalone basis, the Wheeling generated approximately $20 million of adjusted EBITDA for the full quarter. We hope to obtain active control of the Wheeling soon and are excited about the opportunities that lie ahead. At Long Ridge, reported EBITDA for the quarter was $35.7 million, up materially from Q2, driven by the full period impact of higher capacity revenue and partially by sales of excess gas in West Virginia. With current production exceeding 100,000 MMBTU per day across our gas production operations, we anticipate Long Ridge to achieve its $160 million annual EBITDA run rate in this fourth quarter.

Flipping to slide 4, I'll briefly touch on the highlights at each segment at our rail segments, adjusted Eva was 29.1 Million, which included 8.4 million attributable, attributable to the Wheeling for the 5 weeks. We owned the company on a standalone basis. The Wheeling generated approximately 20 million of adjusted. Eva to offer the full quarter. We hope to obtain active control of the Wheeling soon and are excited about the opportunities that lay ahead.

At long range reported Evita for the quarter was 35.7. Million up materially from Q2 driven by the full period impact of higher capacity revenue and partially by sales of excess gas uh, in West Virginia.

Ken Nicholson: At Jefferson, EBITDA was $11 million, in line with last quarter's results as we prepare to commence revenue service under two contracts, each with minimum volume commitments that represent approximately $20 million of annual adjusted EBITDA. At Repauno, construction of our phase two transloading project is fully funded and progressing on plan. We have two contracts and one letter of intent in place at Repauno for phase two that together represent $80 million of annual EBITDA once operational. Earlier this month, Repauno received the long-awaited permit for the construction of our phase three cavern system. It's been a productive year to date, but we have a handful of important priorities we're focused on over the next few months, and we briefly list those on slide five. First, we'll take active control of the Wheeling immediately upon approval by the Surface Transportation Board.

With current production exceeding 100,000 MMBtu per day across our gas production operations, we anticipate Long Reach to achieve its 160 million annual EVA run rate in this fourth quarter.

At Jefferson IBA was 11 million in line with last quarter's results. As we prepare to commence Revenue Service under 2 contracts. Each with minimum volume. Commitments that represent approximately 20 million of annual adjusted Ava.

And a repauno construction of our Phase 2 translating project is fully funded and progressing on plan. We have 2 contracts and 1 Loi in place of repondre for Phase 2 that together represent 80 million of annual. Ebita once operational and earlier this month, Rapa received the long-awaited permit for the construction of our phase 3 Cavern system.

It's been a productive year to date but we have a handful of important priorities. We're focused on over the next few months and we briefly list those on slide 5.

Ken Nicholson: The timing is a bit uncertain, but given the current federal government shutdown, we do believe our application is a priority for the STB. Second, at Long Ridge, with the business reaching our base financial targets, we intend to pursue strategic alternatives, including a potential monetization of the business. It is a great asset and a great market environment to be exploring a sale, and I'll touch base some more on our plans for Long Ridge in just a bit. Finally, we plan to refinance our existing parent-level debt with a new bond issuance in the coming weeks. That financing should put us in a position with a strong long-term balance sheet that allows us for deleveraging over time. Moving to slide six, I'll talk a little more about the capital structure.

First, we'll take active control of the Wheeling immediately upon approval by the surface Transportation board. The timing, uh, is a bit uncertain, but given the current federal government shutdown, uh, but we do believe our application is a priority for the stb.

Second at long range, with the business reaching our base financial targets, we intend to pursue strategic alternatives, including a potential monetization of the business. It is a great asset and a great market environment to be exploring a sale, and I'll touch base some more on our plans for Long Ridge in just a bit.

And finally, we plan to refinance our existing parent level debt with a new Bond issuance in the coming weeks.

That financing should put us in a uh, in a position with a strong long-term balance sheet that allows us for deleveraging over time.

Ken Nicholson: Our capitalization at the end of September reflected the new credit facility and preferred stock that we issued in August, simultaneously with the acquisition of the Wheeling. Total debt was $3.7 billion, of which $1.2 billion was at our parent level and $2.5 billion was at our subsidiaries and is non-recourse to the parent. As I mentioned, prior to year-end, we plan to refinance our existing parent-level credit facility with a new long-term bond issuance. We expect the new bonds to be the only debt at our parent level and benefit from cash flows that we receive from our business segments. All of the operating cash flow generated by our rail segment is permitted to be distributed to the parent level. With the new business coming online at Repauno and Jefferson, we expect to generate additional cash flow available for parent debt service from those entities.

Moving to slide 6, I'll talk a little more about the capital structure.

Ken Nicholson: The result is more than ample cash flow beyond debt service for reinvestment or deleveraging. In addition, any proceeds in the event of a sale of Long Ridge will be available for further deleveraging. Moving to slide eight, we'll dig a little deeper into the quarterly results and activity at each of our segments. Starting with the rail segment, we posted revenue of $61.7 million and adjusted EBITDA of $29.1 million in Q3, compared with revenue of $42.1 million and adjusted EBITDA of $20.7 million in Q2. At Transstar, overall car loads, average rates, and revenues for the quarter were stable. Coke volumes came in lower for the quarter, resulting from the incident at US Steel's Clairton production unit. We've seen coke volumes rebound and expect them to be back to historical levels in the coming months.

Our capitalization at the end of September reflected as new credit facility and preferred stock that we have issued in August simultaneously with the acquisition of the Wheeling. Total debt was 3.7 billion of which 1.2 billion was at our parent level and 2.5 billion was at our subsidiaries and is non-recourse to the parent. As I mentioned prior to your end, we plan to refinance our existing parent level credit facility with a new long-term Bond issuance. We expect a new bonds to be the only debt at our parent level and benefit from cash flows that we received from our business segments. All of the operating cash flow generated by our rail segment, is permitted to be distributed to the parent level. And with the new business coming online at repauno and Jefferson, we expect to generate additional cash flow available for parent Debt Service from those entities.

In addition, any proceeds in the event of a sale of Long Ridge will be available for further deleveraging.

Moving to slide 8, we'll dig a little deeper into the quarterly results and activity at each of our segments, starting with the rail segments.

We posted revenue of 61 uh 7 million and adjusted ebit. Dog 29.1 million in Q3 compared with revenue of 42.1 million and adjusted Eva of 20.7 million in Q2 a tranzstar. Overall car, loads average rates in revenues for the quarter were stable.

Ken Nicholson: Away from coke, volumes were up for the quarter, offsetting the bulk of the lower coke volumes. Transstar operating expenses also continue to be stable as fuel costs and other material cost items have been largely unchanged. We are bullish about the quarter to come at Transstar and expect the investments committed by Nippon Steel to drive expansion of revenue and profits next year and beyond. More importantly, the Wheeling. I'm pleased to say, even in the short period of time that we have now owned the company, the business is exceeding our expectations. Volumes and revenues at the Wheeling were up approximately 10% versus the company's second quarter, and EBITDA was up 20% versus the company's Q2. These strong results reflected practically none of the $20 million of annual efficiencies that we are targeting, and our outlook for the new business opportunities for the combined business continues to grow.

Co volumes came in lower for the quarter, resulting from the incident at U.S. Steel's Claritin production unit. We've seen Coke volumes rebound and expect them to be back to historical levels in the coming months. Away from Coke, volumes were up for the quarter, offsetting the bulk of the lower Coke volumes.

Tranzstar, operating expenses. Also continue to be stable as fuel costs and other material cost. Items have been largely unchanged. We're bullish about the quarters to come a trans star and expect the Investments committed by nipon Steel to drive expansion of Revenue and profits next year and Beyond

more importantly the Wheeling I'm pleased to say even in the short period of time that we have now owned the company, the business is exceeding, our expectations,

Volumes and revenues at the Wheeling were up approximately 10% versus the company's second quarter and Evita was up 20% versus the company's 2q.

Ken Nicholson: While the third quarter is typically a seasonally stronger quarter for the Wheeling, we're off to a good start in October, and we hope to maintain the strong momentum in Q4. Flipping to slide nine, I'll talk a little bit more about our integration plans for the Wheeling. We went through a similar slide on our second quarter call, but given the recent strong performance from the Wheeling, we have slightly increased our financial targets from last quarter and now expect EBITDA for the combined Transstar and Wheeling of at least $220 million run rate by the end of 2026, up from our $200 million original estimate. The building blocks to that target are provided in the bar chart. For the most recent third quarter, the two companies generated combined annual EBITDA, as is, of $164 million, with $83 million attributable to Transstar and $81 million to the Wheeling.

The strong results, reflected practically, include none of the $20 million of annual efficiencies that we are targeting, and our outlook for the new business opportunities for the combined business continues to grow. While the third quarter is typically a seasonally stronger quarter for Wheeling, we're off to a good start in October and we hope to maintain the strong momentum in Q4.

Flipping the slide 9. I'll talk a little bit more about our integration plan for the Wheeling. We went through a similar, a similar slide on our second quarter call. But given the recent strong performance from the Wheeling. We have slightly increased our financial targets from last quarter and now expect Eva for the combined tranzstar and Wheeling of at least 220 million dollar run rate by the end of 2026 up from our 200 million dollar original estimate.

Ken Nicholson: Our $20 million target for annual cost savings is comprised of a detailed line-item-based work plan that we plan to implement together with Wheeling senior management. We expect the entirety of these savings to be implemented within the next 12 months. The two next components relate to high-confidence revenue opportunities. The first is a specific opportunity connected to our Repauno terminal. For that project, Repauno customers plan to source natural gas liquids from fractionators located directly on the Wheeling rail system. Total quantities represent about 30,000 car loads annually. At current market rates per car load, that's approximately $20 million of incremental annual EBITDA at the Wheeling. The second revenue opportunity is at Transstar, where additional freight volumes into and out of US Steel's facilities will be substantial as a result of the commitments made by Nippon Steel.

The building blocks that, uh, to that Target are provided in the bar chart for the most recent third quarter, the 2 companies, generated combined annual, ebita as is of 164 million with 83 million attributable to tranzstar in 81 million to the Wheeling.

Our $20 million target for annual cost savings is comprised of a detailed line item-based work plan that we plan to implement together with Wheeling senior management. We expect the entirety of these savings to be implemented within the next 12 months.

The 2 next components relate to high confidence, Revenue opportunities. The first is a specific opportunity connected to our repauno terminal

For that project for Pono customers, plan to Source, Natural Gas, Liquids from fractionators located directly on the Wheeling rail system. Total quantities represent about 30,000 car. Loads annually, a current market rates per Carlo, that's approximately 20 million dollars of incremental annual ebita at the Wheeling.

Ken Nicholson: Nippon has committed to invest a total of $5 billion to expand production specifically at US Steel's Pittsburgh and Gary, Indiana, facilities. We expect these investments to result in 10% to 20% increases in shipments, or approximately $15 million of annual EBITDA. The bar chart excludes a number of additional items, including organic growth and pricing gains, and a pipeline of new business opportunities that we are pursuing at the Wheeling as well. Next, on to Long Ridge. Long Ridge generated $35.7 million of EBITDA in Q3 versus $23 million in Q2. Power plant capacity factor was again at the top of the industry at 96%. We did take a brief scheduled maintenance outage here in the month of October, so our capacity factor for Q4 will reflect that, but we expect West Virginia gas production revenues to more than offset the outage.

The second revenue opportunity is a Tranzstar, where additional freight volumes into and out of U.S. deals facilities will be substantial as a result of the commitments made by Nippon Steel.

Nippon has committed to invest a total of $5 billion to expand production, specifically at U.S. Steel's Pittsburgh and Gary, Indiana facilities. We expect these investments to result in a 10% to 20% increase in shipments, or approximately 1.5 million tons annually.

The bar chart excludes a number of additional items, including organic growth, pricing gains, and a pipeline of new business opportunities that we are pursuing at Wheeling as well.

Next on to Long Ridge Long Ridge generated 35.7 million of ibadan. Q3 versus 23 million in Q2.

Power plant capacity factor was again at the top of the industry at 96%.

Ken Nicholson: With West Virginia now online, we're producing over 100,000 MMBTU per day versus the 70,000 MMBTU per day required at the plant. We expect to see higher revenues from excess gas in Q4, higher than we experienced in Q3, of course. We continue to push forward on a number of initiatives to drive growth at Long Ridge. The 20 megawatt uprate in our power generation continues to advance. While precise timing of receiving approval and implementing the uprate is not a prescribed event, we are highly confident in the outcome. Adding 20 megawatts of generating capacity at today's power price adds $5 million to $10 million of annual EBITDA to the P&L. We continue to see more inbound interest from behind-the-meter projects.

We did take a brief scheduled maintenance outage here in the month of October, so our capacity factor for Q4 will reflect that. However, we expect West Virginia gas production revenues to more than offset the outage.

With West Virginia now online, we're producing over 100,000 MMBtu per day versus the 70,000 MMBtu per day required at the plant. So we expect to see higher revenues from excess gas.

In Q4, um, and higher than we experienced in Q3, of course.

And we continue to push forward on a number of initiatives to drive. Growth at Long Ridge, the 20 million. Uh sorry the 20 megawatt up rate in our power generation continues to advance while precise timing of receiving approval and implementing. The upright is not a prescribed event. We are highly confident in the outcome.

Adding 20 megawatts of generating capacity at today's power price will add $5 million to $10 million of annual EBITDA to the P&L.

Ken Nicholson: Potential structures we're considering include partnering with others to develop new data center facilities on our land, or just a direct lease of the land that we own to generate a valuable fixed income stream, or potentially providing backup power for a standby fee together with the land lease. Either way, the market continues to be active, and we think this bodes well for Long Ridge's value proposition in the months ahead. Now moving on to slide 11. With Long Ridge now running at its $160 million annual EBITDA target and continued strong momentum on behind-the-meter opportunities, we plan to explore strategic alternatives for the business. Long Ridge is an incredibly high-quality asset. The plant ranks at or near the top of the list nationally in efficiency, reliability, and profitability on a per megawatt basis.

Providing backup power for a standby fee together with a land lease.

Either way, the market continues to be active, and we think this bodes well for Long Ridge's value proposition in the months ahead.

Now, moving on to slide 11 with Longbridge, running at its $160 million annual EBIT, Target and continued strong momentum behind the meter opportunities. We plan to explore strategic alternatives for the business.

Ken Nicholson: With the macro environment as strong as ever in the current feeding frenzy for low-cost power generation, we have high expectations for the potential sale of the asset. On to Jefferson. Jefferson generated $21.1 million of revenue and $11 million of adjusted EBITDA in Q3 versus $21.6 million of revenue and $11.1 million of EBITDA in Q2. Volumes at the terminal were slightly lower, driven by softer crude oil imports, but were offset largely through higher average rates per barrel. As discussed previously, we have two contracts representing a total of $20 million of incremental annual EBITDA commencing in the coming months. In addition, we're in late-stage negotiations for additional contracts with multiple parties to handle conventional crude and refined products, as well as renewable fuels. Some of these negotiations involve business that would commence in the coming months with little to no incremental investment or CapEx.

Long Range is an incredibly high-quality asset. The plant ranks at or near the top of the list nationally in efficiency, reliability, and profitability on a per megawatt basis.

With the macro environment as strong as ever. In the current Feeding Frenzy for low-cost power generation, we have high expectations for the potential sale of the asset.

On the Jefferson, the company generated $21.1 million in revenue and $11 million in adjusted EBIT for Q3, compared to $21.6 million in revenue and $11.1 million in EBIT for Q2.

Volumes at the terminal were slightly lower, driven by softer crude oil imports, but were offset largely through higher average rates per barrel.

Ken Nicholson: Finally, I'll close out with Repauno. Phase two construction is proceeding as planned and toward our goal of completion by the end of 2026. We have two customers signed up under long-term contracts and an additional customer with whom we executed a letter of intent and expect to finalize the long-term contract by the end of this year. In the aggregate, these three pieces of business represent minimum volumes of 71,000 barrels per day and approximately $80 million of annual EBITDA for phase two. The two contracts are each for five-year terms commencing upon completion of phase two construction, while the third letter of intent is for five years with a two-year extension at the option of our customer. We're excited to have announced early this month that Repauno received the permit for the construction of our phase three underground handling system.

As discussed previously, we have 2 contracts representing a total of 20 million of incremental annual ibida, commencing in the coming months. In addition, we're in late stage negotiations for additional contracts with multiple parties to handle conventional crude and refined products as well as renewable fuels and some of these negotiations involve business that would commence in the coming months, with little, to no incremental, investment or capex.

And finally, I'll close out with repauno Phase 2 construction. It is proceeding as planned and toward our goal of completion by the end of 2026.

We have 2 customers signed up under long-term contracts and an additional customer with whom we executed a letter of intent and expect to finalize the long-term contract by the end of this year. In the aggregate, these 3 pieces of business represent minimum volumes of 71,000 barrels per day and approximately $80 million of annual IBA for Phase 2.

The two contracts are each for five-year terms, commencing upon completion of phase 2 construction. While the third letter of intent is for five years, with a two-year extension at the option of our customer.

Ken Nicholson: While it has been a long time coming, I want to reiterate how important a milestone this can be for Repauno. The cavern project, of course, can convey attractive economics and cash flows in the future, but in our view, receiving the permits also creates value in the near term as our market can now appreciate the much larger potential for our business and our strategic position in a growing market for liquid exports. In conclusion, we're happy with our team's progress during the quarter, and we look forward to reporting to you all in the near term with updates on each of our key priorities in the months ahead. I will now turn the call back to Alan. Thank you, Ken. Michelle, you may now open the call to Q&A. Thank you.

And we're excited to have announced earlier this month. That Rapa received the permit for the construction of our phase 3 underground handling system.

While it has been a long time coming, I want to reiterate how important a milestone this can be for the Repauno Cavern project. Of course, it can convey attractive economics and cash flows in the future. But in our view, receiving the permits also creates value in the near term as our market can now appreciate the much larger potential for our business and our strategic position in the growing market for liquid exports.

Ken Nicholson: 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. One moment for our first question. Our first question comes from the line of Giuliano Bologna with Compass Point. Your line is open. Please go ahead. Good morning, Ken. And congrats on a pretty impressive quarter and beat this quarter. As a first question, it's pretty clear that the FIP is evolving from being a development company to being much more of an operating company. With that transition, are you expecting any material increases in your SG&A and your cost structure? Fundamentally, no. Our G&A really is more of a fixed expense. As the company grows, revenues, EBITDA grow, G&A shouldn't be a variable item linked to that type of growth. It should stay relatively flat.

In conclusion, we're happy uh with our team's progress during the quarter and we look forward to reporting to you all in the near term with updates on each of our key priorities. In the months ahead, I will now turn the call back to Alan. Thank you Ken! Michelle, you may now open the call to Q&A.

Thank you as a reminder to ask a question. Please press star 1, 1 on your telephone and wait for your name to be announced to enjoy your question, please. Press star 1 1 again. 1 moment for our first question.

Our first question comes from the line of Giuliano bologna. With compass point, your line is open. Please go ahead.

And congrats on, you know, a pretty impressive quarter and uh 1 beat this quarter. Um as a first question it's pretty clear that, you know, the fifth is evolving into uh evolving from being a development company to being much more of an operating company. And and with that transition, are you expecting any of your material increases in your your sdna and your cost structure?

Ken Nicholson: I will say, on a quarterly basis, if you just look back, Q4 has always come in slightly higher as we have some end-of-year adjustments in the G&A line and what have you. That's just a quarterly thing. Across the year, the aggregate expense is something we expect to stay relatively consistent, Giuliano. That's helpful. Now that you've completed the acquisition of Wheeling, can you give us some examples of the synergies that you'll be able to get between Wheeling and Transstar having those two businesses together? Yeah, absolutely. There's just a tremendous amount that we are identifying and eager to act upon. Obviously, we're not in a position to act on much of this until we're out of the voting trust, but immediately thereafter, we're going on a long list of opportunities. We talked about the $20 million of cost savings and efficiencies.

Uh, fundamentally, know, uh, our G&A really is more of a fixed expense. And as the company grows, Revenue should not grow G&A; it shouldn't be a variable item linked to that type of growth. It should stay relatively flat. I mean, I will say,

On a quarterly basis. If you just look, look back Q4 has always come in slightly higher. As we have some end of year adjustments, in the GNA line, and what have you? But, uh, that's just a quarterly thing across the year. The aggregate expense is something we we expect to, uh, to stay relatively consistent Juliana.

That's awful. And and now that you've completed the acquisition Wheeling, can you give us an example of the synergies that you'll be able to get between uh reloading transfer having those 2 businesses together?

Yeah, absolutely. There's there's just a tremendous amount that uh, that we are identifying and eager to to act upon, you know, obviously uh we're not in a position to act on much of this until we're out of the uh,

Ken Nicholson: That's a long list of discrete items. Pretty frankly, straightforward stuff. We have high confidence in those items combined: purchasing power, elimination of redundant expenses, etc., etc. I think we feel very confident around that $20 million target. Above and beyond that, there is a much longer list of potential combination. I would just say, enhancements, things like network optimization. An example would be where today, Transstar may take volumes out of a US Steel facility and quickly hand those volumes at an interchange off to another freight rail provider for shipment of that product out to, let's just say, the West Coast. Tomorrow, when we jointly operate with the Wheeling, we will keep those volumes on the Wheeling system potentially for a longer period of time. That just means more revenue for us.

Long list of discrete items uh pretty frankly straightforward stuff, we have high confidence in those items. Uh combined purchasing power elimination of redundant. Expenses etc, etc. I think we we feel uh very confident around that 20 million dollar Target above and beyond that, there is a much longer list of

Uh, potential combination.

Uh, I would just say enhancements like network optimization. I mean, an example would be where today, Tranzstar may take volumes out of a U.S. Steel facility and quickly hand those volumes at an interchange off to another freight rail provider for shipment of that product, you know, out to, let's just say, the West Coast. Well tomorrow, when we jointly operate with the Wheeling, we will keep those volumes on the Wheeling system potentially for a longer period of time.

Ken Nicholson: It will still hand it off to the same railroad or maybe a different railroad at the end. When you think about the math of that, that's good for the customer, and obviously, that's good for our business. Other dynamics are existing customers who now can benefit from the expanded reach of the connected rail systems. Customers today who may not have access into the Pittsburgh market or into various markets in Ohio, if you're a customer who originates on Transstar and want access to the Ohio market in a more simple and direct way, or vice versa, a customer in Ohio who wants access to the Pittsburgh market, we now can provide that access holistically. That's a new opportunity for the customer who may otherwise be using another railroad to access the markets we now serve on a combined basis.

And uh, that just means more revenue for us and it will still hand it off to the same Railroad and maybe a different railroad at the end. But uh, when you think about the math of that, um, that's good for the customer. Uh, and obviously that's that's good for our business. Um, other Dynamics are existing customers, who, you know, now can benefit from the expanded reach of the connected rail systems, you know, customers today, who may not have access into the Pittsburgh Market, or into various markets in Ohio, for your customer who originates on tranzstar and want access to the Ohio market in a more simple and direct way or vice versa, a customer in Ohio.

Wants access to the Pittsburgh Market. We now can provide that access holistically.

Ken Nicholson: There's a long list of those sorts of things, and we're eager to set out and make those things happen. None of that is included in our outlook or the $220 million target for the railroad. I do think there's some, hopefully, upside in those targets we've laid out. Thanks for your help with me. As a quick follow-up on a very similar topic, now that you have a scaled platform with Wheeling and Transstar together, if you do more acquisitions going forward, what kind of synergies do you think you can realize by having a dorsal side platform and continuing to have token acquisitions, even if the acquisitions are not physically next to the current system? Yeah. I mean, I think bigger is better. This was something we've done with our historical rail investments, and each incremental investment is that much more creative.

So, that's a new opportunity for the customer who may otherwise be using another railroad to access the markets. We now serve on a combined basis, there's a long list of those sorts of things. And, uh, you know, we're we're eager to, you know, set out and make those things happen. None of that is included in our Outlook or the 220 million Target for the railroad. So, I do think there's some some, you know, hopefully upside in in those targets we've laid out,

Thanks a quick follow up on very similar topic. Now that you now that you have a scale platform with the with the wheeling and transfer together, if you do more Acquisitions, going forward. What what kind of synergies do you think you can realize, you know, by having endurance side platform and continue to add, you know, tuck in Acquisitions even if the Acquisitions are not you know physically you know next to the, the current system

Yeah, yeah. I mean, I think, um, you know, bigger is better and, um,

Ken Nicholson: We're excited about it, and we're excited to keep up the effort to go execute on more M&A in the rail space. The types of synergies would be roughly the same. Obviously, if they're not a connecting railroad that we would be investing in, some of the revenue enhancements wouldn't be there, but the same types of cost eliminations would be there. I'm excited about it. I think we've now got a bigger, better platform, and we're even better positioned to go out and buy more railroads. That's very helpful. I appreciate it. Congrats on a great quarter. Thank you. One moment for our next question. Our next question will come from the line of Brian McKenna with Citizens. Your line is open. Please go ahead. Thanks. Good morning, everyone. It's great to see all the momentum in the rail segment, specifically with Wheeling.

This was something, you know, we've done with our historical rail investments, and each incremental investment is how much more creative. So, you know, we're excited about it, and we're excited to keep up the effort to go, uh, you know, execute on more M&A in the rail space. Um, you know, the types of synergies would be roughly the same. Obviously, if they're not a connecting railroad that we would be investing in, some of the revenue enhancements, you know, wouldn't be there, but the same types of cost eliminations would be there. And so, uh, and I, I, I, I’m excited about it, I think.

I think we've now got a bigger, better platform, and we're in an even better position to go and buy more railroads.

That's right. Hold on; I appreciate it. And congrats on a great quarter.

Thank you. And 1 moment for our next question.

Our next question will come from the line of Brian McKenna with Citizens. Your line is open, please go ahead.

Ken Nicholson: I appreciate all the detail on the quarterly trends and then the near-term and the longer-term outlook. Do you have an updated timeline around STB approval? Is it still a reasonable expectation that gets done by year-end, or has that maybe gotten pushed a little bit just with the government shutdown? No, my guess is that is still a reasonable expectation. What I can say is, look, the federal government shutdown does affect the Surface Transportation Board. Prior to the shutdown, the STB had communicated a target for end of November for reaching a decision. I have a decent sense that at the STB, this is a priority for them. I'm not aware of any detractors regarding this combination. Our assumption is when the government reopens, this will continue to be a high item on their list of priorities. I think it's hopefully sooner versus later.

Uh, thanks. Good morning, everyone. Um, it's great to see all the momentum in rail segments, specifically with Wheeling. I appreciate all the detail on the quarterly trends and then the near-term and longer-term outlook. But do you have an updated timeline around STD approval? And then, is it still a reasonable expectation that it gets done by year-end or, um, because that may have gotten pushed a little bit, just with the government shutdown.

No, my guess is that it's still a reasonable expectation. I mean, what I can say is, uh, look, the federal government shutdown does affect the Surface Transportation Board. So, uh, prior to the shutdown, the STB had communicated a target for the end of November for reaching a decision.

Um, you know I have a decent sense that at the STV you know, this this this this is a uh a priority, you know for them I'm not aware of any detractors uh regarding this combination. And so you know, our assumption is, when the government reopens this will be you know, I'll continue to be a high, you know.

Ken Nicholson: It's anyone's guess as to when the government reopens, but hopefully shortly thereafter, we should get the green light. That's helpful. Just to follow up on the rail segment, how much cash did the segment generate in the quarter? Is there a way to think about the full quarter run rate of cash generation within the rail segment? Can you just remind us, what is the top priority? I think I know the answer to it, but what's the top priority for uses of this excess cash? Yeah. The EBITDA on a combined basis, assuming the full, the way to think about it is just the actual third quarter before anything, before $20 million of efficiencies, before all these revenue opportunities and what have you. EBITDA was about $40 million. CapEx at Transstar was near zero. CapEx at the Wheeling was, oh, I want to say, six or seven million.

Item on their list of priorities? Yeah, I think it's, you know, hopefully sooner versus later. It's anyone's guess as to when the government reopens, but, um, hopefully, you know, shortly thereafter we should get the green light.

Whole quarter run rate of cash generation within the rail segments. Um, and then again can you just remind us, you know, what is the top priority? I think I know the answer to it, but what's the top priority for uses of this excess cash?

Yeah. Um,

The, uh, you know, ebita on a on a combined basis, assuming the full the way to think about it is just the actual third quarter before anything before 20 million of efficiencies before, all these Revenue opportunities and what have you you know, Eva was uh about $0 million uh capex at tranzstar was near zero.

Ken Nicholson: It was a little higher in Q3 for them with a number of big projects that they took care of during the warmer weather. It will not be that high in the fourth quarter, so it's not necessarily a great indication of CapEx to come. Call that cash flow, let's just say on a normalized basis of about $35 million, rounding up, well, $32 to $35 million. All of that cash will be available to shoot up to our parent, and it'll be used initially for debt service. We expect that cash flow to grow materially, $20 million a year of cost savings, revenue enhancements, what have you. We do expect there to be excess cash available at the parent level. What will we use the excess cash for after debt service? That will depend in part upon the investment opportunities we see at the time.

Capex at uh at the Wheeling was oh I want to say uh 6 or 7 million. It's a little higher in Q3 for them. Um, with a number of big projects that they took care of during the warmer weather, it will not be that High um, in the fourth quarter. So it's not necessarily a great indication of, you know, capex to come. But call that cash flow. Let's just say on a normalized basis of about, you know, 35 million rounding up, well, 32 to 35 million. All of that cash will be available to, you know, shoot up to our parent and it'll be used initially for Debt Service.

Ken Nicholson: Look, deleveraging, I think we view would be a good thing for us. The debt we're putting in place will certainly be one we could deleverage with. Obviously, we talked about Long Ridge as well. With that transaction, should it occur, there'll be meaningful deleveraging as well. I think that excess cash right here, absent a highly accretive investment opportunity, we would probably use to deleverage over time. Yeah. Okay. That's great. Just one final question for me real quick. In terms of the bridge refi, what's the base case expectation in terms of getting that done? I'm assuming you maybe want to get that done by year-end. That's the first part of the question. In terms of the specifics, does an asset sale need to take place in order for that to get done? How are you thinking about the duration and cost of this debt capital? Yeah.

We expect that cash flow to grow materially 20 million a year of uh cost savings Revenue enhancements. What have you? And so um you know but but so we do expect there to be excess cash available at the parent level. What will we use the excess cash for after Debt Service? You know, that will depend in part upon the investment opportunities? We see at the time look deleveraging, I think we, we, we, we view would be a, a good thing for us and the debt we're putting in place. Will will certainly, you know, be 1. We we could de-lever with, obviously we talked about Long Ridge as well, and, uh, with that transaction, you know, should it occur. Um, there'll be meaningful deleveraging as well. So I think that excess cash right here absent, you know, uh, a highly accretive, you know, investment opportunity. We would probably use to to de-lever over time.

Yeah. Okay that's great. And then just 1 uh final question for me real quick, just in terms of the bridge refi um you know what the base case expectation, in terms of of getting that done I'm assuming you maybe want to get that done by year end. Um and so that's the first part of the question and then just in terms of the specifics like doesn't asset sale need to take place in order for that to get done. And then how are you thinking about the duration and cost of this debt capital?

Ken Nicholson: Yes, definitely want to get done by year-end. Don't need any monetization of another asset in order to get it done. We're ready to go. I think we've got a great structure that is a great fit for the company. I'm not going to talk about duration. It'll be at least five years or pricing, if that's okay. We're going to commence the marketing process here shortly. I'm going to leave that to the side for now. Maybe we can comment on that once we start the marketing. Look, it's going to be a bond, not terribly different than the bond we previously had outstanding. The previous bond was a five-year term, no-call, two. I think you should expect something generally similar to that.

Um, yeah. So uh yes definitely want to get done by year end. Um,

Ken Nicholson: I'd like a shorter call protection period because with the ramp-up in cash flow, and particularly the cash that'll be coming from Jefferson, Repauno, starting throughout the next 12 months, we're going to want to use cash to deleverage. Having a shorter window of expensive premiums and call protection, I think, would be advantageous for the company. Outside of that, it'll be a typical senior notes offering. Got it. Thanks so much. Thank you. One moment for our next question. Our next question comes from the line of Greg Lewis with BTIG. Your line is open. Please go ahead. Yeah. Hi. Thank you. Good morning. Thanks for taking my questions. I would love for you to talk a little bit about Repauno. We saw the news about getting the permit for phase three. Kind of curious what next steps are, maybe roughly how much CapEx that might be involved.

Don't need any monetization of another asset in order to get it done. Um, we're we're ready to go. I think, uh, I think we've got a great structure that, uh, that uh, is a great fit for the company. I'm not going to talk about, you know, duration, uh, it'll be at least 5 years, you know, or pricing if that's okay. I just, you know, we're going to commence the marketing process here shortly. So I'll I'll, I'll just, I'm going to leave that to the side for now and uh, you know, and and maybe we can comment on that once we once we start the marketing. But uh, look, it's going to be a bond. Um, not terribly different than the bond. We previously had outstanding. Uh, the previous Bond was a 5 year term. No, call 2. I think you should expect something generally similar to that. I like a shorter, you know, call Protection period because with the ramp up in cash flow and particularly the cash that'll be coming from Jefferson repauno, you know, starting throughout the next 12 months. Uh, we're going to want to use cash to deleverage.

And, uh, having a shorter window of, uh, you know, expensive premiums and call protection, I think would be advantageous for the company. But outside of that, it'll be a typical, uh, you know, senior notes offering.

Got it. Thanks so much.

Thank you. And 1 moment for our next question.

Our next question comes from the line of Greg Lewis with BTIG. Your line is open. Please go ahead.

Yeah. Hi. Thank you. Good morning and, uh, thanks for taking my questions. Um,

I would love for you to talk a little bit about, um,

Ken Nicholson: Probably more importantly, when we think that could be ready and start generating some revenue. Good morning, Greg. Thanks for the question. It was a marathon getting here, needless to say. Obtaining the phase three permit was a lengthy occurrence, but we're thrilled to be where we are. Now is when the sprint portion of the development begins. Look, I think it's a very big deal for Repauno. This is really what it's been about for quite some time. It's just a tremendous expansion of the asset. Phase three represents effectively a doubling of what phase two is. Phase two is one above-ground storage tank at just over 600,000 barrels. Phase three, as permitted, is two underground caverns each at 640,000 barrels. It is a big deal, a game changer for the economics of Repauno.

Repauno. Um, you know, we saw the news about getting the permit for Phase 3. I'm kind of curious what the next steps are, maybe roughly how much capex that might be involved, and then probably more importantly, when we think that could be ready and start generating some revenue.

The um, yep. Good morning Greg. Thanks for the question. Um yeah it it was it was a marathon getting getting here it uh needless to say obtaining the phase 3 permit was was was a was a lengthy, uh, occurrence. But we're thrilled to be, you know, where we are. And and now is when the Sprint, you know, uh portion of the development, you know, begins.

Ken Nicholson: We have a great macro with continued demand for export and gateways out of the East Coast. We are effectively sold out on phase two, and we're eager to get going on phase three. What we need to do is finalize some of the construction contracting. Our estimates today are that building one cavern would take about $200 million. Whether there would be additional handling systems connected to that cavern or not will depend upon the ultimate throughputs and what have you, generating about $70 to $80 million of annual EBITDA. The economics are pretty compelling. I mean, it's like a three-year payback. Timing will depend upon the competitive bidding with our contractors. It's realistically probably between two and three years to build a cavern. If we built two at the same time, it would be the same timeframe. It's not like a sequential event. The economics are wildly compelling.

I think it's a very big deal for a Pano. This is, this is really what it's been about for quite some time. It's just tremendous, uh, expansion of the asset phase 3 represents effectively, a doubling of what phase 2 is Phase 2 is 1 above ground storage tank at just over 600,000. Barrels of phase. 3 as permitted is 2, underground Caverns each at 640,000 barrels, so it is a uh, big deal a game changer for the economics of repauno. We have a great macro with um continued demand for export uh and uh gateways out of the East Coast. You know, we are effectively sold out on Phase 2. And so, uh, we're, we're eager to get going on phase 3. Well, we need to do is finalized some of the construction Contracting. Our estimates today. Estimates are that, uh, building 1 Cavern 1 Cavern would take about 200 million dollars.

Ken Nicholson: The macro is super, and we're eager to get going on commercial contracting, final cost estimating, and getting construction contracts ready, and then we can hit the financing markets and get the thing going. Okay. Great. Appreciate the caller. Thank you. My other question is around Long Ridge. You highlighted the potential strategic alternatives. I wanted maybe a little bit more detailed question. How should we think about Long Ridge as a power generation facility versus the natural gas wells, which are outside of that? I don't know who the buyer is, but I could see a situation where a lot of buyers might not be interested in having natural gas wells. Just kind of curious how you're thinking about that. Could we see a scenario where maybe we maintain those natural gas wells for the production?

Um, you know, whether there would be additional Handling Systems connected to the cavern or not, will depend upon the ultimate throughputs and what have you, uh, generating about 70 to 80 million of annually, but does. So the economics are pretty compelling. I mean, it's a, it's like a 3 year, payback timing will depend upon, you know, the competitive bidding with our contractors. It's realistically probably between 2 and 3 years to, to build a cavern. Uh, if we built 2 at the same time, it would be the same same time frame. It's not like a sequential event, but uh um, look, the economics are wildly compelling. The macro is uh, super. And so we're eager to get going.

On commercial contracting, we know that final cost estimating and getting construction contracts ready is essential. Then we can hit the financing markets and get the thing going.

Okay, great. Appreciate the caller, thank you. And then and then my other question is around, um, Long Ridge. You highlighted you know, the potential strategic Alternatives. Um, I wanted to maybe a little bit more detailed question. How, what is the what is, how does it, how should we think about, you know, Long Ridge as a power generation facility versus the natural gas Wells? Which

Ken Nicholson: Just kind of curious how we should be thinking about how this plays out. I think there is a broad spectrum of potentially interested parties from all types of backgrounds, and that's a good thing. You're right about the integrated gas, and that is, in our opinion, a huge differentiator and driver of value. I would expect that the ultimate transaction involves a sale of the entire business, the entire asset, the gas, the power plant, the land. It is, of course, possible you're right that the buyer preferred to just take the plant and the land, and we keep the gas. Anything is possible. We could do anything. Our focus, of course, is on maximizing value. I will tell you right now, with the feedback and the inbounds that we've been getting, we haven't had anyone indicate they'd be interested in just one asset.

You know, are outside of that and and and, you know, I don't know who the buyer is, but but I, I could see a situation where a lot of buyers might not be interested in in in in having natural gas Wells. Um, just kind of curious how you're thinking about that and could we see a scenario where maybe we maintain those natural gas Wells for the production? Um, just kind of curious. Um, how we should be thinking about how this plays out.

Yeah, uh, I think there is a broad spectrum of potentially interested parties from all types of backgrounds, and that's a good thing.

Um, you're right about the integrated gas and that is in our, you know, opinion a huge differentiator and Driver of value. So I would, uh,

expect that the ultimate transaction involve a sale of the entire business, the entire asset, the entire business, the gas, the power, plant, the land,

Uh, it is, of course, possible. You're right that that, uh, the buyer, you know, preferred to to, to just take the plant. In the land, we keep the gas that that anything is possible. We could do anything. Our focus, of course, is on maximizing value.

Ken Nicholson: The interest has been in the whole site. It's why it is such a wildly profitable asset, and those profits are effectively locked in with the power swap sales. I think maintaining that balance and that integrated aspect of the asset is actually an important thing, and the buyer universe appreciates that. I think it's possible it could end up being cut in two, if you will, with one half sold and one half kept. My view right now is that's less likely. Super helpful. Thank you very much, gentlemen. Thank you. I would now like to hand the conference back over to Alan Andreini for closing remarks. Thank you, Michelle. Thank you all for participating on today's call. We look forward to updating you after Q4. This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.

Um, I will tell you, you know, right now, um, with the feedback and the inbounds that we've been getting, we haven't had any uh, any anyone indicate they'd be interested in? Just 1 asset. You know, the interest has been in the whole site.

Uh it's it's why it is such a wildly profitable, you know, asset and those profits are effectively locked in with the Power Swap sales. And I I think maintaining that balance and that that integrated uh aspect of the asset is actually an important thing and and the buyer Universe appreciates that. So I I I I uh I think it's possible. It could, it could end up being, you know, cut in 2, if you will um with 1 half sold and 1/2 kept, uh, my my view right now is that's less likely.

Super helpful. Thank you very much gentlemen.

Thank you. And I would now like to hand the conference back over to Alan and drainie for closing remarks.

Thank you, Michelle and thank you all for participating on today's call. We look forward to updating you after Q4.

this concludes

today's conference call. Thank you.