Q2 2026 FTAI Infrastructure Inc Earnings Call

August 6, 2026

Operator: Good day, and thank you for standing by. Welcome to the FTAI Infrastructure Q2 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I'll now hand the conference over to your first speaker today, Alan Andreini, Investor Relations. Please go ahead.

Speaker #1: raised. To withdraw your question, please press *11 again. Please revise that today's conference be recorded. On night, the handed conference over to your first speaker today, Alan Andreini, Investor Relations.

Alan Andreini: Thank you, Marvin. I would like to welcome you all to the FTAI Infrastructure earnings call for Q2 2026. Joining me here today are Ken Nicholson, the CEO of FTAI 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 in listen-only mode and is being webcast. In addition, we will be discussing some non-GAAP financial measures during the call today, including adjusted EBITDA. The reconciliations of those measures to the most directly comparable GAAP measures can be found in the earnings supplement. Before I turn the call over to Ken, I would like to point out that certain statements made today will be forward-looking statements, including regarding future earnings.

Speaker #2: Marvin. I would like to welcome you all to for the Q2 of 2026. Joining me here today are Ken Nicholson, the CEO of FTI the FTI Infrastructure Earnings Call Infrastructure, and Buck Fletcher, the company's CFO.

Speaker #2: We encourage you to download it 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.

Speaker #2: In addition, we will be discussing some non-GAAP financial measures during the call today, including adjusted EBITDA. The reconciliations of those measures to the most directly comparable GAAP measures can be found in the earnings supplement.

Speaker #2: Before I turn the call over to Ken, I would like to point out that certain statements made today will be forward-looking statements, including regarding future earnings.

Speaker #2: These statements, by their nature, are uncertain, and may differ materially from actual results. We encourage you to review the disclaimers in our press release and investor presentation regarding non-GAAP financial measures and forward-looking statements, and to review the risk factors contained in our quarterly report filed with the SEC.

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 forward-looking statements, and to review the risk factors contained in our quarterly report filed with the SEC. I would like to turn the call over to Ken.

Speaker #2: Now, I would like to turn the call over to Ken.

Speaker #3: Okay. Thank you very much, Alan, and good morning, everyone. Welcome to this morning's call. The Q2 was a very active one for us, and today we will walk through our various accomplishments for the quarter, our financial results, and we'll talk a little bit about our goals and expectations for the remainder of this year.

Ken Nicholson: Okay. Thank you very much, Alan, and good morning, everyone. Welcome to this morning's call. Q2 was a very active one for us. Today we will walk through our various accomplishments for the quarter, our financial results, and we'll talk a little bit about our goals and expectations for the remainder of this year. Suffice to say, we're pleased with our overall results and excited about the momentum we're carrying into the months ahead. We'll kick things off on slide three of the supplement. As we stated before, our goals for this year have three primary components: sell Longridge and deleverage our balance sheet, continue to grow our railroad portfolio, and position our terminals for monetization next year at attractive values. I'm pleased to report that we made good progress on each of these goals during Q2.

Speaker #3: Suffice to say, we're pleased with our overall results and excited about the momentum we're carrying into the months ahead. We'll kick things off on slide 3 of the supplement.

Speaker #3: As we stated before, our goals for this year have three primary components. Sell long-range and de-leverage our balance sheet, continue to grow our railroad portfolio, and position our terminals for monetization next year at attractive values.

Speaker #3: And I'm pleased to report that we made good progress on each of these goals during Q2. First, we announced the sale of long-range at the end of April, and while timing is not necessarily an exact science, we currently expect to be in a position to close the transaction by the end of Q3.

Ken Nicholson: First, we announced the sale of Long Ridge at the end of April, while timing is not necessarily an exact science, we currently expect to be in a position to close the transaction by the end of Q3. The sale will result in substantial deleveraging and a material reduction in our interest expense at our parent level. Second, our rail business posted another record quarter in both revenues and adjusted EBITDA. We made a small acquisition at the end of Q2 and are expecting several additional acquisition opportunities in the months ahead as the M&A market in the rail sector continues to heat up. We have an exceptional platform to continue to integrate acquisitions in the rail space, I'm confident we'll be successful adding to our portfolio.

Speaker #3: The sale will result in substantial de-leveraging and a material reduction in our interest expense at our parent level. Second, our rail business posted adjusted EBITDA.

Speaker #3: We made a small acquisition at the end of Q2, and are expecting several additional acquisition opportunities in the months ahead as the M&A market in the rail sector continues to heat up.

Speaker #3: We have an exceptional platform to continue to integrate acquisitions in the rail space, and I'm confident we'll be successful adding to our portfolio. And finally, our terminals made good progress on important projects that will create value and position each of Jefferson and Rapano for monetizations next year.

Ken Nicholson: Finally, our terminals made good progress on important projects that will create value and position each of Jefferson and Repauno for monetization next year. All in, we have good momentum carrying us into what we expect to be a very productive H2 2026. Moving to slide four, we'll review the financial results for the quarter. Adjusted EBITDA for Q2 came in at $76.1 million, up materially from $45.9 million for Q2 2025. On the right side of the slide, we illustrate adjusted EBITDA for each of our last four quarters, excluding the results of Long Ridge, which we now account for as an asset held for sale. Excluding Long Ridge, adjusted EBITDA was $48.7 million for Q2, which represents a new quarterly record and equates to just under $200 million on an annualized basis.

Speaker #3: All in, we have good momentum carrying us into what we expect to be a very productive second half of 2026. Moving to slide 4, we'll review the financial results for the quarter.

Speaker #3: Adjusted EBITDA for Q2 came in at 76.1 million, up materially from 45.9 million for the first quarter for the Q2 of 2025. On the right side of the slide, we illustrate adjusted EBITDA for each of our last four quarters, including the results of long-range, which we now account for, excluding the results of long-range, which we now account for as an asset held for sale.

Speaker #3: Excluding long-range, adjusted EBITDA was 48.7 million for Q2, which represents a new quarterly record and equates to just under 200 million on an annualized basis.

Speaker #3: In the quarters ahead, we expect revenues and adjusted EBITDA from our Rail and Terminal segments to continue to grow, driven by the contribution from our recently acquired Tidewater Logistics acquisition and developments at our terminals, including, most notably, Rapano's Phase 2 project.

Ken Nicholson: In the quarters ahead, we expect revenues and adjusted EBITDA from our rail and terminal segments to continue to grow, driven by the contribution from our recently acquired Tidewater Logistics acquisition and developments at our terminals, including most notably Repauno's stage 2 project. Flipping to page five, we'll talk about our balance sheet and deleveraging. As you may recall, our existing corporate debt contains terms allowing for repayment with proceeds from the Long Ridge sale to be made at a lower premium than would otherwise be due if funded with other sources of cash. With less premium required, we're able to repay more principal. In total, we expect to eliminate approximately $1.4 billion of total debt from our balance sheet, of which a little over $1.1 billion is at the Long Ridge level and approximately $300 million is other debt in addition to the $1.1 billion at Long Ridge.

Speaker #3: Flipping to page 5, we'll talk about our balance sheet and de-leveraging. As you may recall, our existing corporate debt contains terms allowing for repayment with proceeds from the long-range sale, to be made at a lower premium than would otherwise be due if funded with other sources of cash.

Speaker #3: So with less premium required, we're able to repay more principal, and total we expect to eliminate approximately 1.4 billion of total debt from our balance sheet, of which a little over 1.1 billion is at the long-range level, and approximately 300 million is other debt in addition to the 1.1 billion at long-range.

Speaker #3: Debt service at our parent level was declined by about 25 million annually, meaningfully improving our leverage metrics. And we expect our leverage metrics to continue to improve over the next several quarters as we bring online new business at our terminals, especially at Rapano.

Ken Nicholson: Debt service at our parent level was declined by about $25 million annually, meaningfully improving our leverage metrics. We expect our leverage metrics to continue to improve over the next several quarters as we bring online new business at our terminals, especially at Repauno. Altogether, with a deleveraged balance sheet and higher free cash flow generation, we expect to be well-positioned to act on new investment opportunities, especially in the freight rail space. Moving to slide seven, we'll get into the details at each of our segments, starting with our railroad. We posted new quarterly records for both revenue and EBITDA in Q2. Revenue came in at $92.2 million, and adjusted EBITDA was $42.4 million for the quarter, compared with pro forma Q2 2025 revenue of $81.2 million and adjusted EBITDA of $37.6 million. Remember, our reported results for last year exclude the results of The Wheeling.

Speaker #3: Altogether, with a de-leveraged balance sheet and higher free cash flow generation, we expect to be well-positioned to act on new investment opportunities, especially in the freight rail space.

Speaker #3: Moving to slide 7, we'll get into the details at each of our segments, starting with our railroad. We posted new quarterly records for both revenue and EBITDA on Q2.

Speaker #3: Revenue came in at 92.2 million and adjusted EBITDA was 42.4 million for the quarter, compared with pro forma Q2 25 revenue of 81.2 million, and adjusted EBITDA of 37.6 million.

Speaker #3: Remember, our reported results for last year exclude the results of the wheeling, so we're showing pro forma figures to demonstrate what revenues and EBITDA would have been if we include the wheeling standalone results last year.

Ken Nicholson: We're showing pro forma figures to demonstrate what revenues and EBITDA would have been if we include the Wheeling standalone results last year. Overall volumes for the quarter continued to be steady, with higher carloads at Wheeling offsetting slightly lower volumes at Transtar as U.S. Steel continues to undertake a substantial overhaul and upgrade of the largest blast furnace at Gary Works, which, while dormant now for the upgrade, will ultimately be a meaningful plus for us. Since carloads at Wheeling are generally at a higher average rate than at Transtar, on a blended basis, we reported higher average pricing for the quarter. Integration of the Wheeling & Lake Erie Railway is going smoothly, with anticipated synergies accumulating as expected and critical IT consolidation wrapping up here in Q3.

Speaker #3: Overall volumes for the quarter continue to be steady, with higher carloads at the Wheeling offsetting slightly lower volumes at Transstar, as USTL continues to undertake a substantial overhaul and upgrade of the largest blast furnace at Gary Works. While that furnace is dormant now for the upgrade, it will ultimately be a meaningful plus for us.

Speaker #3: Since carloads at the wheeling are generally at a higher average rate than at Transstar on a blended basis, we reported higher average pricing for the quarter.

Speaker #3: Integration of the wheeling in Lake Erie Railways, going smoothly with anticipated synergies accumulating as expected in critical IT consolidation wrapping up here in Q3.

Speaker #3: On the revenue side, we continue to grow the list of opportunities now to railroads are operating as one. Additional propane carloads are planned to start early next year when Rapano's Phase 2 commences.

Ken Nicholson: On the revenue side, we continue to grow the list of opportunities now that the two railroads are operating as one. Additional propane carloads are planned to start early next year when Repauno stage 2 commences, and the pipeline of additional opportunities is substantial. In total, we continue to estimate in excess of $50 million of incremental annual EBITDA potential from the various new revenue sources manifesting in the future. On slide eight, we'll talk a little bit about our acquisition of Tidewater Logistics. At the end of Q2, we acquired Tidewater for $45 million of cash consideration, funded with an add-on to our existing parent-level term loan. Tidewater operates a total of four rail-served terminals, the largest of which is directly served by the Wheeling, making the acquisition a particularly accretive one.

Speaker #3: And the pipeline of additional opportunities is substantial. In total, we continue to estimate in excess of 50 million of incremental annual EBITDA. Potential from the various new revenue sources manifesting in the future.

Speaker #3: On slide 8, we'll talk a little bit about our acquisition of Tidewater Logistics. At the end of Q2, we acquired Tidewater for 45 million of cash consideration.

Speaker #3: Funded with an add-on to our existing parent-level term loan. Tidewater operates a total of four rail-served terminals, the largest of which is directly served by the wheeling, making the acquisition a particularly accretive one.

Speaker #3: Handling and transloading over 20,000 carloads annually of a variety of commodities, Tidewater's terminals play an important role in customer supply chains enabling the transition of freight between rail and truck efficiently and flexibly.

Ken Nicholson: Handling and transloading over 20,000 carloads annually of a variety of commodities, Tidewater's terminals play an important role in customer supply chains, enabling the transition of freight between rail and truck efficiently and flexibly. We expect Tidewater to contribute approximately $9 million of annual EBITDA, implying an attractive purchase multiple. More importantly, we plan to leverage Tidewater's management expertise and relationships to expand the rail terminal business and drive additional growth going forward. As I mentioned, we expect the remainder of the year to be an active one on the rail M&A front. On slide nine, we describe the types of situations that we're currently evaluating. Opportunities fall into three primary buckets. The first is portfolios of short line and regional railroads, which are larger needle-moving investment opportunities that can convey substantial combination efficiencies.

Speaker #3: We expect Tidewater to contribute approximately 9 million of annual EBITDA, applying an attractive purchase multiple. But more importantly, we plan to leverage Tidewater's management expertise and relationships to expand the rail terminals business and drive additional growth going forward.

Speaker #3: As I mentioned, we expect the remainder of the year to be an active one on the rail M&A front, and on slide 9, we describe the types of situations that we're currently evaluating.

Speaker #3: Opportunities fall into three primary buckets. The first is portfolios of short line and regional railroads, which are larger needle-moving investment opportunities that can convey substantial combination efficiencies.

Speaker #3: Second set of opportunities involves sales by corporate and industrial parties that today directly own the railroad that connects their facilities to the national freight network.

Ken Nicholson: Second set of opportunities involves sales by corporate and industrial parties that today directly own the railroad that connects their facilities to the national freight network. Our acquisition of Transtar from U.S. Steel a number of years ago is a good example of that type of opportunity. The third is more regional in nature, involving tuck-ins of smaller single railroads or terminals, much like our recent acquisition of Tidewater. We are actively pursuing opportunities in each of these three categories, I'm optimistic that we'll be able to continue to grow our existing platforms here in the future. Now on to Jefferson. At Jefferson, we reported $24.3 million of revenue and $13 million of adjusted EBITDA in Q2 versus $21.6 million of revenue and $11.1 million of EBITDA in Q2 of last year.

Speaker #3: Our acquisition of Transstar from USTL a number of years ago is a good example of that type of opportunity. And the third is more regional in nature, involving tuck-ins of smaller single railroads or terminals, much like our recent acquisition of Tidewater.

Speaker #3: We are actively pursuing opportunities in each of these three categories, so I'm optimistic that we'll be able to continue to grow our existing platform here in the future.

Speaker #3: Now on to Jefferson. At Jefferson, we reported 24.3 million of revenue and 13 million of adjusted EBITDA on Q2 versus 21.6 million of revenue and 11.1 million of EBITDA on Q2 of last year.

Speaker #3: Refined products and ammonia came in at new quarterly records in terms of both volumes and revenues as our export business with customers for those products continues to grow.

Ken Nicholson: Refined products and ammonia came in at new quarterly records in terms of both volumes and revenues as our export business with customers for those products continues to grow. Crude volumes were impacted by volatility in the Middle East, and we experienced a temporary reduction in inbound ship volumes during Q2. We've been informed that we should expect ship volumes to return here in Q3 and to be further supplemented by inbound volumes of crude by rail, so we forecast the remainder of the year to be strong on the crude front. We continue to negotiate new contracts to expand our business at Jefferson, and we lay out those opportunities on slide 11. The largest opportunities we're pursuing are with existing customers and involve expansions of the services we currently provide.

Speaker #3: Crude volumes were impacted by volatility in the Middle East, and we're experienced and we experienced a temporary reduction in inbound ship volumes during Q2.

Speaker #3: We've been informed that we should expect ship volumes to return here in Q3 and to be further supplemented by inbound volumes of crude by rail, so we forecast the remainder of the year to be strong on the crude front.

Speaker #3: We continue to negotiate new contracts to expand our business at Jefferson, and we lay out those opportunities on slide 11. The largest opportunities we're pursuing are with existing customers, and involve expansions of the services we currently provide.

Speaker #3: Our customers have been investing heavily in their nearby facilities to increase production and market reach, which would require more products to flow through Jefferson.

Ken Nicholson: Our customers have been investing heavily in their nearby facilities to increase production and market reach, which would require more products to flow through Jefferson. Our goal is to execute on all three opportunities during this year and commence revenue shortly thereafter. In total, the three opportunities represent in excess of $50 million of annual incremental EBITDA and utilize existing assets requiring little to no incremental investment or CapEx. Now shifting to Repauno. Our focus continues on phase II, where construction proceeds as planned toward our goal of completion by the end of this year, with revenue commencing shortly thereafter. We have long-term contracts in place for a portion of our capacity and are seeing high demand for the remaining available space.

Speaker #3: Our goal is to execute on all three opportunities during this year and commence revenue shortly thereafter. In total, the three opportunities represent in excess of 50 million of annual incremental EBITDA and utilize existing assets requiring little to no incremental investment or capex.

Speaker #3: Now shifting to Rapano. Our focus continues on Phase 2, where construction proceeds as planned toward our goal of completion by the end of this year with revenue commencing shortly thereafter.

Speaker #3: We have long-term contracts in place for a portion of our capacity and are seeing high demand for the remaining available space. With the disruption in the Middle East spread for propane exports, continued to be attractive and based on the conversations we're having, we expect to commence revenue service in early 2027, near or at full capacity.

Ken Nicholson: With the disruption in the Middle East, spreads for propane exports continue to be attractive, and based on the conversations we're having, we expect to commence revenue service in early 2027, near or at full capacity. In the aggregate, we can handle close to 100,000 barrels per day for the combined assets of phase I and phase II, representing approximately $80 million of annual EBITDA. Construction of phase II is progressing well, and we're excited to start the commissioning process later this year. On slide 13, we show some images of the progress the team has been making with a large cryogenic tank now fully above ground and readying for completion, as well as the pipes and manifolds connecting the tank to our rail racks and ship dock.

Speaker #3: In the aggregate, we can handle close to 100,000 barrels per day for the combined assets of Phase 1 and Phase 2, representing approximately 80 million dollars of annual EBITDA.

Speaker #3: Construction of Phase 2 is progressing well, and we're excited to start the commissioning process later this year. On slide 13, we show some images of the progress the team has been making with a large cryogenic tank now fully above ground and readying for completion.

Speaker #3: As well as the pipes and manifolds connecting the tank to our rail racks and ship dock. The majority of expenditures for Phase 2 have been financed with long-term, low-cost, tax-exempt debt, which is an ideal match for a project of this type. We've had a great partnership with the Authority, which we hope to continue to expand for future growth projects at Rapano.

Ken Nicholson: The majority of expenditures of phase II have been financed with long-term, low-cost tax-exempt debt, which is an ideal match for a project of this type, and we've had a great partnership with the New Jersey Economic Development Authority, which we hope to continue to expand for future growth projects at Repauno. Finally, on slide 14, we'll briefly close out with Long Ridge. Given the pending nature of the sale, I'll only hit the highlights for the quarter. Adjusted EBITDA came in at $27.4 million in Q2 versus $23 million in Q2 of last year. Power plant capacity factor of 85% was impacted by the planned outage we commenced in Q1 and continued for a total of 11 days into Q2. Away from that outage, the fundamentals continue to be strong with power prices and capacity revenue continuing at historically high levels.

Speaker #3: Finally, on slide 14, we'll briefly close out with Long Ridge. Given the pending nature of the sale, I'll only hit the highlights for the quarter.

Speaker #3: Adjusted EBITDA came in at 27.4 million in Q2 versus 23 million. In Q2 of last year, power plant capacity factor of 85% was impacted by the planned outage we commenced in Q1 and continued for a total of 11 days into Q2.

Speaker #3: Away from that outage, the fundamentals continue to be strong with power prices and capacity to revenue continuing at historically high levels. We average a little more than 73,000 MMBTU per day of gas production, versus the 70,000 MMBTU per day required at the plant, and we expect to maintain production well in excess of plant requirements and generate continued revenues from excess gas sales in the quarters ahead.

Ken Nicholson: We averaged a little more than 73,000 MMBtu per day of gas production versus the 70,000 MMBtu per day required at the plant. We expect to maintain production well in excess of plant requirements and generate continued revenues from excess gas sales in the quarters ahead. So far in Q3, Long Ridge is off to a great start with capacity factor at nearly 100% currently and gas production continuing in excess of our plant's needs. I'm going to conclude our remarks there. Now I will turn it back over to Alan.

Speaker #3: So far in Q3, Long Ridge is off to a great start with capacity factor at nearly 100% currently, and gas production continuing in excess of our plant's needs.

Speaker #3: I'm going to conclude our remarks there, and now I will turn it back over to Alan.

Speaker #1: Thank you, Kenneth. Marvin, you may now open the call to Q&A.

Alan Andreini: Thank you, Ken. Marvin, you may now open the call to Q&A.

Speaker #2: Thank you. At this time, we'll conduct a question-and-answer session. As a reminder, just a question. You'll need to press star 11 on your telephone and wait for your name to be announced.

Operator: Thank you. At this time, we'll conduct a question and answer session. As a reminder to ask a question, you'll need to press star one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Giuliano Bologna of Compass Point. Your line is now open.

Operator: Thank you. At this time, we'll conduct a question-and-answer session. As a reminder to ask a question, you'll need to press star one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Giuliano Bologna of Compass Point. Your line is now open.

Speaker #2: To address your question, please press star 11 again. Please stand by while we compile the Q&A roster. And our first question concerns a line of Juliana Bologna of Compass Point Airlines now open.

Speaker #3: Oh, good morning. Congrats on the continued solid results and execution. As a first question, it's been about a year since you made the acquisition of the wheeling.

Giuliano Bologna: Good morning. Congrats on the continued, solid results and execution. As a first question, it's been about a year since you made the acquisition of The Wheeling. Can you expand on how you feel now about that acquisition and how progress has evolved since the acquisition?

Speaker #3: Can you stand on how you feel now about that acquisition and how progress has evolved since the acquisition?

Speaker #4: Yeah, definitely. Good morning, Juliana. Yes, we actually announced the acquisition on August 6th of last year, so it's been exactly one year since we announced the wheeling acquisition.

Ken Nicholson: Good morning, Giuliano. We actually announced the acquisition on 6 August of last year, so it has been exactly one year since we announced The Wheeling acquisition. It is a timely question. I would say we are thrilled. The acquisition has been a game changer for our rail platform, of course. The Wheeling itself is exceeding our original expectations. We are excited about the next 6 months ahead. Very excited about propane volumes continuing to grow. We have seen particular activity and strength in propane volumes on The Wheeling. Everything is working out super. The integration has worked out great. Very few issues. I would say, Transtar, as I mentioned in some of my remarks, was a little softer in Q2 for a good reason. US Steel is investing in their Gary, Indiana facility, upgrading their largest blast furnace.

Ken Nicholson: Good morning, Giuliano. We actually announced the acquisition on 6 August of last year, so it has been exactly one year since we announced The Wheeling acquisition. It is a timely question. I would say we are thrilled. The acquisition has been a game changer for our rail platform, of course. The Wheeling itself is exceeding our original expectations. We are excited about the next six months ahead. Very excited about propane volumes continuing to grow. We have seen particular activity and strength in propane volumes on The Wheeling. Everything is working out super. The integration has worked out great. Very few issues. I would say, Transtar, as I mentioned in some of my remarks, was a little softer in Q2 for a good reason. US Steel is investing in their Gary, Indiana facility, upgrading their largest blast furnace.

Speaker #4: So, it's a timely question. I would say we are thrilled—the acquisition has been a game changer for our rail platform. Of course, the Wheeling itself is exceeding our original expectations.

Speaker #4: We're excited about the next six months ahead. Very excited about propane volumes continuing to grow. We've seen particular activity and strength in propane volumes on the wheeling.

Speaker #4: Everything's working out super. The integration has worked out great. Very few issues. I would say Transstar, as I mentioned in some of my remarks, was a little bit softer in Q2 for a good reason.

Speaker #4: US Steel is investing in their Gary Indiana facility. Upgrading their largest glass furnace. But what that's meant is in Q2, things were a little softer in volumes, and by virtue of owning the wheeling, we posted in the aggregate a great result, record results.

Ken Nicholson: What that has meant is in Q2, things were a little softer in volumes, and by virtue of owning The Wheeling, we posted in the aggregate, a great result, record results. The impact on diversity, incremental growth opportunities, everything is checking out great. I am really thrilled that we were able to accomplish that acquisition and the management team has been doing a superb job integrating the two companies together.

Speaker #4: So the impact on diversity, incremental growth opportunities, everything's checking out great, and I'm really thrilled that we were able to accomplish that acquisition and management team the management team has been doing a superb job integrating the two companies together.

Giuliano Bologna: That is very helpful. As the next question, with respect to the third category of central rail acquisitions, what is it about corporate systems and what is it about that category specifically?

Speaker #3: That's very helpful. And as a next question, with respect to the third category of central rail acquisitions, what is it about corporate systems and what is it about that category specifically?

Speaker #4: Yeah, it's interesting. The industrial carve-outs, you see those slightly less frequently. Obviously, Transstar was a great example of an industrial carve-out, but there are a number of corporate entities—very large corporate entities—in the agricultural space, in the metals and mining space, and in other sectors that today own their own track systems. Most of them are shorter switching lines.

Ken Nicholson: It is interesting. The industrial carve-outs, you see those slightly less frequently. Obviously, Transtar was a great example of an industrial carve-out. There are a number of corporate entities, very large corporate entities in the agricultural space and the metals and mining space, and in other sectors that today own their own track systems. Most of them are shorter switching lines. Those create unique opportunities for those corporate parents to generate liquidity and frankly focus on their core business and divest a non-core asset. The beauty of those opportunities in particular is just like Transtar, most of those businesses have historically been operated solely for their parent owner. Just like with Transtar, they have not pursued third-party growth opportunities. That is really fundamentally what makes them unique and particularly accretive. We are seeing a pickup in activity.

Speaker #4: Those create unique opportunities for those corporate parents to generate liquidity, and frankly, focus on their core business and divest in on-core asset. The beauty of those opportunities in particular is just like Transstar, most of those businesses have historically been operated solely for their parent owner, and just like with Transstar, they have not pursued third-party growth opportunities.

Speaker #4: And that's really fundamentally what makes them unique and particularly creative. We're seeing a pickup in activity there are a few industrial parents that are beginning the process to divest their in-house shorelines.

Ken Nicholson: There are a few industrial parents that are beginning the process to divest their short lines and connecting lines. We're going to be pretty aggressive on those situations. I think those are among the best situations out there.

Speaker #4: And connecting lines. And so look, we're going to be pretty aggressive on those situations. I think those are among the best situations out there.

Speaker #3: Yeah, that's very helpful. I appreciate it. And I'll jump back in the queue.

Giuliano Bologna: Yeah, it's very helpful. I appreciate it. I'll jump back in the queue.

Speaker #2: Thank you. Well, on to our next question. Our next question concerns a line from Jeff Kaufman of Citizens Bank. Jeff, the line is now open.

Operator: Thank you. We'll move on with our next question. Our next question comes on the line of Jeff Kaufman of Citizens. Your line is now open.

Operator: Thank you. We'll move on with our next question. Our next question comes on the line of Jeff Kauffman of Citizens. Your line is now open.

Speaker #5: Thank you very much, and congratulations on the quarterly results. I wanted to follow up on the wheeling question. You had identified a synergy target. On the integration of wheeling, I was just kind of curious—did you achieve all of the synergies you were looking for?

Jeff Kaufman: Thank you very much, and congratulations on the quarterly results. I want to follow up on the Wheeling question. You'd identified a synergy target on the integration of Wheeling. I was just kind of curious, did you achieve all of the synergies you were looking for? How far along that process are you, and have you discovered any other opportunities as you've worked through that process?

Jeff Kauffman: Thank you very much, and congratulations on the quarterly results. I want to follow up on the Wheeling question. You'd identified a synergy target on the integration of Wheeling. I was just kind of curious, did you achieve all of the synergies you were looking for? How far along that process are you, and have you discovered any other opportunities as you've worked through that process?

Speaker #5: How far along that process are you? And have you discovered any other opportunities as you've kind of worked through that process?

Speaker #4: Yeah, hey, Jeff. Good morning. I would say we're about 80% through the integration process. There's still a little bit more to do, particularly in the IT front, which we'll be wrapping up here in the third quarter.

Ken Nicholson: Hi, Jeff. Good morning. I would say we are about 80% through the integration process. There is still a little bit more to do, particularly on the IT front, which we will be wrapping up here in Q3. It is going almost exactly as planned. We identified $20 million of cost efficiencies. We are right on that target. We are not demonstrating all of that necessarily in the Q2 results because some of those initiatives were enacted during Q2, so you will start to see the full impact in Q3 and Q4. On the cost efficiencies, I cannot say we have necessarily identified additional opportunities to reduce costs. I feel like we did a pretty complete job as we were assessing The Wheeling acquisition a year ago. We have come in at the target there. Where we have, I think, done better than we originally expected is on additional revenue opportunities.

Speaker #4: And it's going almost exactly as planned. I mean, we identified $20 million of cost efficiencies; we are right on that target. We're not demonstrating all of that necessarily in the second quarter results because some of those initiatives were enacted during Q2.

Speaker #4: So you'll start to see the full impact in Q3 and Q4. But on the cost efficiencies, I can't say we've necessarily identified additional opportunities to reduce costs.

Speaker #4: I feel like we did a pretty complete job as we were assessing the wheeling acquisition a year ago. And but we've come in at the target there.

Speaker #4: Where we have, I think, done better than we originally expected is on additional revenue opportunities. There's a lot to do between the two companies.

Ken Nicholson: There is a lot to do between the two companies. We are opening additional transload facilities in Pittsburgh that are stimulated by customers on The Wheeling. We would never have done that if we had not acquired The Wheeling. We have been able to expand the industrial footprint, if you will. The two railroads are now operating as one. On the revenue side, we are doing better than expected. Those opportunities take time to flow and to execute. Transload facilities need to be built. They are not terribly complicated, but there is some time there. Look, we are building sustainable, permanent revenue bases with new customers at Transtar that we did not necessarily envision we would have an opportunity to do when we made the acquisition a year ago. I am excited about that.

Speaker #4: We are opening additional transload facilities in Pittsburgh that are stimulated by customers on the Wheeling. We would never have done that if we hadn't acquired the Wheeling.

Speaker #4: We've been able to expand the industrial footprint, if you will, of the two railroads now operating as one. So on the revenue side, we're doing better than expected.

Speaker #4: Those opportunities take time to flow and to execute. Transload facilities need to be built. They're not terribly complicated, but there is some time involved.

Speaker #4: And so look, we're building sustainable, permanent revenue-based bases with new customers at Transstar. That we didn't necessarily envision we would have an opportunity to do when we made the acquisition a year ago.

Speaker #4: So I'm excited about that.

Speaker #5: Okay. And just one follow-up. As you're looking for additional properties to put in the portfolio, given that there's going to be a series of choices out there, could you identify kind of what the two or three things you're looking for at that top of that list as opposed to just whatever properties available?

Jeff Kaufman: Okay, just one follow-up. As you are looking for additional properties to put in the portfolio, given that there is going to be a series of choices out there, could you identify what the two or three things you are looking for at that top of that list as opposed to just whatever property is available? Are you looking to diversify the revenue mix at all? Is there a particular type of situation that you feel is a better fit with the franchise?

Jeff Kauffman: Okay, just one follow-up. As you are looking for additional properties to put in the portfolio, given that there is going to be a series of choices out there, could you identify what the two or three things you are looking for at that top of that list as opposed to just whatever property is available? Are you looking to diversify the revenue mix at all? Is there a particular type of situation that you feel is a better fit with the franchise?

Speaker #5: Are you looking to diversify the revenue mix at all? Is there a particular type of situation that you feel is a better fit with the franchise?

Speaker #4: Working 5%. Great question. Because every short line or regional railroad or rail terminal tends to be snow-flaky in nature. And there are a lot of differentiating factors when we look at situations.

Ken Nicholson: Great question. Every short line or regional railroad or rail terminal tends to be snow flaky in nature. There are a lot of differentiating factors when we look at situations. Yes, things like diversity of commodities, diversity of customers are important, particularly where it helps us diversify our existing commodity base. Things like agricultural exposure, intermodal exposure, those are things we have less of today. It would be nice to diversify into those commodity bases. Most importantly, there are a handful of technical things, railroads that are leased versus owned. Obviously, you want to own property, if at all possible, railroads that have pricing freedom versus have long-term restrictions on their ability to freely price freight and increase prices over time. There are a whole bunch of smaller technical things that ideally go the right way. Fundamentally, though, it is growth.

Speaker #4: Yes, things like diversity of commodities, diversity of customers are important, particularly where it helps us diversify our existing commodity base. Things like agricultural exposure, intermodal exposure, those are things we have less of today.

Speaker #4: So it'd be nice to diversify into those commodity bases. Most importantly, there are a handful of technical things, railroads that are leased versus owned.

Speaker #4: Obviously, you want to own property if at all possible. Railroads that have pricing freedom versus have long-term restrictions on their ability to freely price freight and increase prices over time.

Speaker #4: So there are a whole bunch of smaller technical things that ideally go the right way. Fundamentally, though, it's growth. When we look at a new railroad, we try to identify the opportunities for growth, not just organically, but with additional capital.

Ken Nicholson: When we look at a new railroad, we try to identify the opportunities for growth, not just organically, but with additional capital. Many railroads don't focus on investing more capital to grow their revenue base. Building out a new transload facility, attracting new customers to locate on their rail lines, acquiring real estate adjacent to the rail line. Things like right of way income oftentimes are under-managed businesses within railroads and can be incredibly lucrative, especially with all the data center and power build-out and need for transmission lines and fiber optic cables. When you own railroads, you own those long corridors that have those rights. Fundamentally, it's mostly growth. We really look for railroads we think over a three to five year period, we can double EBITDA. That's how we kind of target things.

Speaker #4: Many railroads don't focus on investing more capital to grow their revenue base. Building out a new transload facility. Attracting new customers to locate on their rail lines acquiring real estate, adjacent to the rail line.

Speaker #4: Things like right-of-way income oftentimes are undermanaged businesses within railroads and can be incredibly lucrative, especially with all the data center and power build-out and need for transmission lines and fiber optic cables.

Speaker #4: When you own railroads, you own those long corridors that have those rights. So fundamentally, it's mostly growth. We really look for railroads where we think over a three-to-five-year period, we can double leave a dot.

Speaker #4: That's how we tend to target things.

Speaker #5: All right. Those are my questions. Thank you.

Jeff Kaufman: All right. Those are my questions. Thank you.

Jeff Kauffman: All right. Those are my questions. Thank you.

Operator: Thank you. One moment for our next question. Our next question comes on the line of Sherif Elmaghrabi of BTIG. Your line is now open.

Speaker #2: Thank you. One moment for our next question. Our next question concerns a line of Sherif Al-Maghrabi of PTIG Airlines now open.

Speaker #6: Hey, thanks and good morning. Pivot away from rail for a second. I want to focus on the terminals businesses. Ahead of monetization, at Jefferson, one of the regional partners has had to deal with, call them, supply chain constraints due to what's going on in the Middle East.

Sherif Elmaghrabi: Hey, thanks. Good morning. To pivot away from rail for a second, I want to focus on the terminals businesses ahead of monetization. At Jefferson, one of the regional partners has had to deal with, call them supply chain constraints due to what's going on in the Middle East. You've talked about the ways that they're going to revive throughput in Q3. Can you just talk about a little bit of puts and takes there, how much rail crude can supplement or kind of offset uncertainty going on with the tanker trade and where is the throughput growth coming from ahead of monetization? I think that'd be very helpful.

Speaker #6: And you've talked about the ways that they're going to revive throughput in Q3. Can you just talk about a little bit of puts and takes there?

Speaker #6: How much rail crude can supplement or kind of offset uncertainty going on with the tanker trade and where is it throughput growth coming from ahead of monetization?

Speaker #6: I think that'd be very helpful.

Speaker #4: Yeah. Yeah. Yeah. It's been a changes every day out in the Middle East as it relates to supply chain dynamics. And we saw the impact of that in the second quarter.

Ken Nicholson: Yeah. It changes every day out in the Middle East as it relates to supply chain dynamics. We saw the impact of that in Q2. What I would say is, for our particular customer, we handle crude volumes through three modes: inbound ships, which originate in the Middle East, trains, which largely originate in Utah, and then inbound by pipe from other pipe-connected sources. Two of the three are not subject to volatility and interruption. Well, a couple of things. One, we've been informed ship volumes are expected to recover in Q3. We just heard that very recently, and so I'm optimistic about Q3 crude volumes overall. Ships can hold up to 500,000 barrels of crude oil on a ship. A train holds about 50,000 barrels.

Speaker #4: What I would say is for our particular customer, we handle crude volumes through three modes: inbound ships, which originate in the Middle East; trains, which largely originate in Utah; and then inbound from by pipe from other pipe-connected sources.

Speaker #4: So two of the three are not subject to volatility and interruption. What our customers are doing is doing is well, a couple of things.

Speaker #4: One, we've been informed ship volumes are expected to recover in Q3. And we just heard that very recently. And so I'm optimistic about Q3 crude volumes overall.

Speaker #4: Ships can hold I mean, up to 500,000 barrels of crude oil on ship. A train holds about 50,000 barrels. So it gives you a sense of the scale and the importance of ship inbound volumes.

Ken Nicholson: It gives you a sense of the scale and the importance of ship inbound volumes. We had a lot of ships come in in Q1 and a lot fewer in Q2. We are transitioning actively to inbound rail. The beauty of inbound rail is you actually get a 2x multiplier because inbound rail volumes from Utah require blending. For every 50,000-barrel train we bring in, we also have to bring in 50,000 barrels of pipeline-originated crude for blending. We're really handling 100,000 barrels for every train. That transition is actively happening. We completed a very important infrastructure project with our Southern Star pipeline, which is one of the many pipelines we built connecting Jefferson directly to refineries. We completed that just about a month ago. That enables for the efficient handling of light crudes and heavy crudes back and forth.

Speaker #4: And we had a lot of ships come in in Q1 and a lot fewer in Q2. But we are transitioning actively to inbound rail.

Speaker #4: The beauty of inbound rail is you actually get a 2x multiplier because inbound rail volumes from Utah require blending, and so, for every 50,000-barrel train we bring in, we also have to bring in 50,000 barrels of pipeline-originated crude for blending.

Speaker #4: So we're really handling 100,000 barrels for every train. That transition is actively happening. We completed a very important infrastructure project with our southern star pipeline, which is one of the many pipelines we built connecting Jefferson directly to refineries.

Speaker #4: We completed that just about a month ago. And that enables for the efficient handling of light crudes and heavy crudes back and forth. And now we are unloading trains, coming from Utah on that business is growing pretty rapidly.

Ken Nicholson: Now we are unloading trains coming from Utah, and that business is growing pretty rapidly. I think at Jefferson, we'll see a return of inbound ship volumes, and we'll see a material increase of inbound rail volumes during Q3 and Q4. That is a very good thing as we're thinking about in a monetizing business in 2027.

Speaker #4: So I think at Jefferson, we'll see a return of inbound ship volumes, and we'll see a material increase of inbound rail volumes during Q3 and Q4.

Speaker #4: That is a very good thing, as we're thinking about in a monetizing business in 2027.

Speaker #6: All right. Super helpful. And obviously, refining margins are very supportive at the moment to more throughput. Pivoting to Raponno, I don't want to put the horse before the carp, but is the plan to get any phase three capacity under contract, or could we see a sale of at least a portion of the business before then?

Sherif Elmaghrabi: Super helpful. Obviously, refining margins are very supportive at the moment to more throughput. Pivoting to Repauno, I don't want to put the horse before the cart, is the plan to get any phase III capacity under contract? Or could we see a sale of at least a portion of the business before then? If you could just remind us on timing for phase III, that's helpful.

Speaker #6: And if you could just remind us on timing for phase three, that's helpful.

Speaker #4: Yeah. We'd love to do that. Phase three is permitted, designed, engineered, ready to go. We won't finance or start construction on phase three until we have a long-term contract in place.

Ken Nicholson: Yeah. We'd love to do that. Phase III is permitted, designed, engineered, ready to go. We won't finance or start construction on phase III until we have a long-term contract in place. We are still contracting the remaining capacity of phase II, so we want to finish that up because that is ready for operation commencement in early 2027. The focus right now is on completing phase II. We'd love to have phase III contracted and under construction when we look to monetize Repauno. It's not something we're necessarily planning on. I think we've already created a lot of value at Repauno in terms of obtaining the permits and having it designed and all fully scoped out. That's something a new owner can look forward to and hopefully underwrite. There is definitely a tremendous opportunity.

Speaker #4: We are still contracting the remaining capacity of phase two. So we want to finish that up because that is ready for operation commencement in early 2027.

Speaker #4: So the focus right now is on completing Phase Two. We'd love to have Phase Three contracted and under construction when we look to monetize Raponno.

Speaker #4: It's not something we're necessarily planning on. I think we've already created a lot of value of Raponno in terms of obtaining the permits. And having it designed and all fully scoped out.

Speaker #4: So that's something a new owner can look forward to and hopefully underwrite. There is definitely a tremendous opportunity. Propane volumes coming out of the Marcellus and Utica, the Appalachian Basin overall, continue to grow.

Ken Nicholson: Propane volumes coming out of the Marcellus and Utica, the Appalachian Basin overall, continue to grow. We are the only export-capable facility on the East Coast that actually has room to grow. It's a great asset we own. I think it's valuable already in phase III, whether we've started construction or signed up customers by the time we monetize. It is certainly a helpful thing if we're able to do that. I don't think it's absolutely necessary. We're not going to wait for that before starting the sale process for Repauno.

Speaker #4: And we are the only export-capable facility on the East Coast that actually has room to grow. So it's a great asset we own. I think it's valuable already in phase three, whether we've started construction or signed up customers by the time we monetize it is certainly a helpful thing if we're able to do that.

Speaker #4: I don't think it's absolutely necessary. We're not going to wait for that for starting the sale process for Raponno.

Speaker #6: Okay. Super helpful. And thanks again.

Sherif Elmaghrabi: Okay, super helpful, and thanks again.

Speaker #2: Thank you. One moment for our next question. Our next question comes from the line of Matthew Erdner of Jones Trading. Your line is not open.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Matthew Erdner of Jones Trading. Your line is now open.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Matthew Erdner of JonesTrading. Your line is now open.

Speaker #7: Hey. Good morning, guys. Thanks for taking the question. Building off of the terminals there, and the disruption in the Middle East, do you feel like now is a good environment for sales on these?

Matthew Erdner: Hey, good morning, guys. Thanks for taking the question. Building off of the terminals there and the disruption in the Middle East, do you feel like now is a good environment for sales on these? As a follow-up to that, I'm curious if you guys have had any reverse inquiry, just given where these are located and who else is around you in those spots.

Speaker #7: And then as a follow-up to that, I'm curious if you guys have had any reverse inquiry, just given where these are located and who else is around you in those spots.

Speaker #4: Yeah. Good morning. Yeah. I think it's a good time. I think it's going to continue to be a good time. For terminal energy terminal M&A, we've definitely received some inbounds.

Ken Nicholson: Yeah, good morning. I think it's a good time, and I think it's going to continue to be a good time for energy terminal M&A. We've definitely received some inbounds, and I would say that activity has picked up somewhat with the shifting of supply chains, largely driven by the conflict in the Middle East, people are sniffing around. We're engaged in a handful of very early conversations on that front. It's interesting, the terminal market is a big one, and there are all different types of terminals, and they trade at very different valuations. Generic inland terminals that just transload liquids from rail to truck or pipe to truck for regional distribution, those tend to trade at high single-digit multiples, typically to MLPs and structured vehicles.

Speaker #4: And I would say that activity has picked up somewhat. With the shifting of supply chains largely driven by the conflict in the Middle East, people are sniffing around.

Speaker #4: And so we're engaged in a handful of very early conversations on that front. It's interesting. The terminal market is a big one. And there are all different types of terminals.

Speaker #4: But and they trade at very different valuations generic inland terminals that just transload liquids from rail to truck or pipe to truck for regional distribution.

Speaker #4: Those tend to trade at high single-digit multiples. Typically to MLPs and structured vehicles. The strategic export terminals are much more valuable on a multiple basis.

Ken Nicholson: The strategic export terminals are much more valuable on a multiple basis and historically have traded at multiples between 12 and 15 times. That's what we own at Jefferson and Repauno. Fingers crossed, we're hopeful we'll be at the high end of those multiple ranges. Fundamentally, Jefferson and Repauno serve a highly strategic role. At Jefferson, we're connected to the two largest refineries in the Western Hemisphere, directly pipeline connected. We are part of the supply chain, an integrated part of the supply chain to those two refineries. Repauno, as I said, we're really the only available gateway on the East Coast that has meaningful room for expansion. With those differentiating characteristics, yeah, I'm pretty optimistic about how things will play out next year.

Speaker #4: And historically, have traded at multiples between 12 and 15 times. That's what we own. At Jefferson. Raponno. And so fingers crossed, we're hopeful we'll be at the high end of those multiple ranges.

Speaker #4: I mean, fundamentally, Jefferson and Raponno serve a highly strategic role. At Jefferson, we're connected to the two largest refineries in the Western Hemisphere. Directly pipeline connected.

Speaker #4: We are part of the supply chain and integrated part of the supply chain to those two refineries. And Raponno, as I said, we're really the only available gateway on the East Coast that has meaningful room for expansion.

Speaker #4: So, with those differentiating characteristics, yeah, I'm pretty optimistic about how things will play out next year.

Speaker #7: Awesome. That's very helpful. I appreciate the color there. And then, going back to rail, I've got just one question there. You guys touched on the Nippon investment.

Matthew Erdner: Awesome. That's very helpful. I appreciate the color there. Going back to the rail, I've got just one question there. You guys touched on the Nippon investment. Do you guys have any line of sight as to when, I guess, construction of that is going to be done and when rail will start to increase from that facility?

Speaker #7: Do you guys have any line of sight as to when those I guess construction of that is going to be done and when rail will kind of start to increase from that facility?

Speaker #4: Probably at some point over the next six months. Feeling everything's on time, on budget, on plan. But probably about a six-month time frame.

Ken Nicholson: Probably at some point over the next six months. Everything's on time, on budget, on plan, but probably about a six-month timeframe.

Speaker #7: Got it. That's helpful. Thank you, guys.

Matthew Erdner: Got it. That's helpful. Thank you, guys.

Speaker #2: Thank you. I'm showing no further questions at this time. I'll now turn it back to Alan Andreini for closing remarks.

Operator: Thank you. I'm showing no further questions at this time. I'll now turn it back to Alan Andreini for closing remarks.

Speaker #8: Thank you, Morvin. And thank you all for participating on today's call. We look forward to updating you after Q3.

Ken Nicholson: Thank you, Marvin, and thank you all for participating on today's call. We look forward to updating you after Q3.

Alan Andreini: Thank you, Marvin, and thank you all for participating on today's call. We look forward to updating you after Q3.

Operator: Thank you for your participation in today's conference.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

[Analyst]: Bye-bye.

Operator: This does conclude the program. You may now disconnect.

Q2 2026 FTAI Infrastructure Inc Earnings Call

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