Ftai Infrastructure Inc Aktie

Good morning, and welcome to the FTAI Infrastructure First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Alan Andreini of Investor Relations. Please go ahead.

Thank you, Jason. I would like to welcome you all to the FTAI Infrastructure Earnings Call for the First Quarter of 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. These statements, by their nature, are uncertain and may differ materially from actual results. We encourage you to review the disclaimers in our press release and investor presentation regarding non-GAAP financial measures and forward-looking statements and to review the risk factors contained in our quarterly report filed with the SEC.

Now I would like to turn the call over to Ken.

Thank you, Alan, and good morning, everyone. Welcome to the call. As we typically do, we'll be referring to the earnings supplement, which you can find posted on our website. Before we get into the quarterly financial results, we're going to kick things off with a discussion of Long Ridge and provide some details on the sale transaction that we announced last week. I'm going to briefly walk through the transaction terms and then I'll talk a little bit about why we believe it to be an important and highly accretive event for our company.

Just over a week ago, we signed an agreement to sell Long Ridge to Mara Holdings for an aggregate transaction value of $1.52 billion. We expect to close the transaction in the third quarter of this year after receiving required regulatory approvals, and there are no other material conditions to closing. Existing Long Ridge debt will either be repaid or assumed by the purchaser, bringing expected net proceeds to FTAI in excess of $300 million. We're pleased with the outcome of the sale process and believe Mara is a great fit as the next owner of Long Ridge. I want to recognize and thank Bob Wholey and the Long Ridge team for doing a remarkable job throughout the entire life cycle of our investment, developing the business plan building a power plant, acquiring gas reserves and turning on and maintaining operations to ultimately create what today is one of the most efficient and profitable power assets in the country.

The transaction value reflects the uniqueness of the Long Ridge asset and results in a meaningful economic return for FTAI over the life of our investment. More importantly, the sale of Long Ridge will allow us to accomplish 2 key goals: First, deleveraging. We plan to use the bulk of the net proceeds received at closing to repay higher cost debt at a parent level, resulting in lower interest expense and higher free cash flow going forward; second, increasing our focus on our core freight rail business. We expect 2026 to be an active year for our railroad with growth driven internally by integration of Transtar and the Wheeling and externally as we pursue a number of acquisition opportunities that leverage our existing platform.

Having higher cash flow and additional debt capacity to fund acquisitions puts us in a good position to make accretive investments in the rail sector in the near future. I'm going to flip to Page 4, and we'll talk a little bit more about 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. So with less premium required, we were able to repay more principal. In total, we expect to reduce parent debt by at least $300 million and reduce our parent level interest expense by about $30 million per year meaningfully improving our leverage metrics.

We expect our leverage metrics to continue to improve over the next several quarters as we realize more integration efficiencies at our rail business and bring online new business at our terminals, especially Repauno.

Turning to Slide 5, with the deleveraged balance sheet and higher free cash flow generation, we expect the bulk of our long-term growth going forward to be driven in the rail sector. We have an enormous opportunity set in front of us in the North American freight rail space and an exceptional platform from which to grow. We expect the remainder of 2026 to be a particularly active one for the rail sector M&A, and we're actively evaluating multiple opportunities and look forward to reporting back on our progress. While we expect our freight rail business to emerge as the dominant source of earnings for us going forward, we're also excited about the future of our 2 terminals and are focused on ensuring that both Jefferson Repauno each reach their earnings potential with the view to monetizing both assets in the future.

Jefferson is currently engaged in conversations with customers for new business, representing at least $50 million of additional annual EBITDA and Repauno similarly is expected to complete its Phase 2 expansion at the end of this year and start revenue service shortly thereafter.

Now we'll go into the results for the quarter. Adjusted EBITDA for Q1 came in at $70.6 million, up materially from $35.2 million for the first quarter of 2025. Given the investment activity during last year, year-over-year comparisons are less meaningful, but I can say that the quarter was a strong one that reflected great progress across our portfolio. At Long Ridge, we took an outage for 25 days that impacted revenues and EBITDA for the quarter. The outage was planned but longer than typical as it related to inspection of the hot gas section of the power turbine, which requires more time but is only required to take place every 4 to 5 years. The inspection resulted in a clean bill of health, but did result in lost revenues for the quarter.

Excluding the impact of the outage, our consolidated Q1 EBITDA would have exceeded $80 million for FTAI and represented a new record. It's important to note that our Q1 results do not reflect a tremendous amount of activity across our business that we expect to contribute to EBITDA in the future. We provide some detail around some of those specific items and the math on the right side of Slide 7. Each of the lighter blue shaded bars represent specific items that require no incremental capital and are either already contracted or otherwise represent cash flow streams that we have confidence in.

Importantly, the bar chart does not include any organic growth or new business wins that we believe could be material and also contribute to incremental EBITDA going forward.

I'll quickly flip to Slide 8 and talk through the highlights of each of our segments. In our Rail segment, adjusted EBITDA was $40.2 million in Q1, up 31% on an apples-to-apples basis versus quarter last year. Q1 was the first full quarter during which we had active control of the Wheeling and we've already begun to realize a portion of our targeted integration savings. At Long Ridge, EBITDA for the quarter was $26.4 million. As I mentioned, without the 25-day planned outage, we estimate that EBITDA for the quarter would have approached $40 million. Gas production for the quarter continued above amounts required to fuel the power plant. So we also generated revenues from excess gas sales during the quarter.

At Jefferson EBITDA for Q1 was $14.4 million and included a full quarter of results from our new ammonia transloading contract. And at Repauno, construction of our Phase 2 transloading protect continues to progress on plan. Once Phase 2 is operational, which is planned for early next year, we expect Repauno to be capable of handling over 80,000 barrels per day of natural gas liquids, generating approximately $80 million of annual revenue -- EBITDA.

Moving to Slide 9, our detailed capital structure. During Q1, we closed our new term loan of approximately $1.35 billion. The net proceeds were used to repay in full the initial loan we issued in connection with acquisition of the wheeling last year. The new term loan represents the only debt at our parent level and carries a coupon of 9.75% per annum. As I mentioned, the loan is prepayable at a reduced premium with proceeds of Long Ridge sale. So we expect the balance of the term loan to be approximately $300 million lower following closing of the sale.

Also during the quarter, we received commitments for the refinancing of a little over $200 million of debt at Jefferson. The net result of everything is a stable balance sheet with no near-term maturities and a path for meaningful deleveraging in the coming months following the Long Ridge sale.

Moving to Slide 11. We'll dig a little deeper into the results at each of our segments, and we're going to start with our railroads. We posted revenue of $85 million and adjusted EBITDA of $40.2 million in Q1 compared with pro forma Q1 2025 revenue of $79.3 million and adjusted EBITDA of $30.6 million. Our actual reported results for last year exclude the results of the Wheeling. So we're showing pro forma figures to demonstrate where revenues and EBITDA would have been if we include the Wheeling stand-alone results for last year. Growth versus last year was driven by a combination of revenue growth from both higher volumes and rates as well as reduced expenses as a result of the initial impact of a large set of cost savings initiatives, which we started to implement in Q1. I will note that the first quarter is typically the softest quarter for our business, especially at the Wheeling where volumes of aggregates and other construction materials always slow down during the winter months. So we're particularly pleased with our results for Q1.

Flipping to Slide 12. We're off to a great start with the combination of Transtar and the Wheeling. We expect the combination to result in 2 sources of financial gains. The first is cost savings, which we expect to impact our results in the near term, and the second is new revenue opportunities, which we expect to occur over the longer term. Cost savings fall into 2 primary buckets: personnel reductions, purchasing power savings and reduced overhead. In total, we're targeting about $23 million of annual cost savings, of which $10 million of annual savings was enacted in Q1, representing $2.5 million of EBITDA for the quarter. The additional $13 million of annual cost savings should be in effect in the relatively near term.

On the revenue side, we continue to grow the list of opportunities now that the 2 railroads are operating as 1. Additional propane carloads are planned to start early next year when Repauno's Phase 2 commences operations. Additional carloads of propane should be substantial given the volumes originate on the wheeling and move to Repauno. And the pipeline of additional opportunities is substantial. In total, we're estimating in excess of $50 million of incremental annual EBITDA potential from the various new revenue sources manifesting in the future.

I'm going to shift to Slide 13, talk about Jefferson. At Jefferson, we reported $27.3 million of revenue and $14.4 million of adjusted EBITDA in Q1 versus $19.5 million of revenue and $8 million of EBITDA in Q1 last year. Volumes at the terminal averaged 275,000 barrels per day, driven by the start-up of the new ammonia export contract, which commenced in late November last year as well as increased volume of inbound crude oil during the quarter. To date, inbound crude volumes have been unaffected by the conflict in the Middle East and the blockage of the Strait of Hormuz, as crude destined to Jefferson has originated largely from Saudi West Coast terminals. We continue to see crude volume steady so far in the second quarter.

We're negotiating new contracts to expand our business at Jefferson. The largest opportunities we are pursuing are with existing customers and involve expansions of the services we currently provide to them. Our customers have been investing heavily in their nearby facilities to increase production and market reach, which will require more products to flow through Jefferson. We hope to execute on all 3 opportunities during this year and commence revenue shortly thereafter. In total, the 3 opportunities represent in excess of $50 million of annual incremental EBITDA and utilize existing assets requiring little to no incremental investment CapEx.

Now shifting to Repauno on Slide 14. Our primary focus at Repauno is on Phase 2, where construction continues to proceed as planned toward our goal of completion by the end of 2026, with revenue commencing shortly thereafter. We have long-term contracts in place for a substantial portion of our capacity and are seeing high demand for the remaining available space. With the disruption in the Middle East, spreads for propane exports are extremely attractive and based on conversations we're having, we continue to expect to commence revenue service in early 2027 at full capacity. In the aggregate, we can handle a total of just over 80,000 barrels per day, representing $80 million of annual EBITDA for the combined assets of Phase 1 and Phase 2.

And finally, on Slide 15, we'll briefly close out with Long Ridge. Given the pending sale, I'm only going to hit the highlights for the quarter. Adjusted EBITDA came in at $26.4 million in Q1 versus $18.1 million in Q1 of last year. Power plant capacity factor of 73% was impacted by the 25-day planned outage as I described earlier. But away from the outage, the fundamentals continue to be strong with power prices and capacity revenue continuing at historically high levels. We averaged a little more than 86,000 MMBtu per day of gas production versus the little more than 70,000 required at the plant. We expect to maintain production significantly in excess of plant requirements and generate continued revenues from excess gas sales in the quarters ahead. So far in Q2, Long Ridge is off to a great start with capacity factor at 100% currently and gas production continuing in excess of our plants needs.

I'm going to conclude our remarks there, and I will now turn it back to Alan.

Thank you, Ken. Jason, you may now open the call to Q&A.

[Operator Instructions] Our first question comes from Brian McKenna from Citizens.

So on the regulatory approvals for the Long Ridge sale, can you walk through exactly what these are? And then do you have any sense when the transaction will close in the third quarter? Are we talking the first half of the quarter or the second half of the quarter, et cetera?

Really just one approval, FERC. There's a requirement to file with FERC. FERC needs to approve the change of control. That filing kicks off the process. I think that filing is imminent. It's possible the filing is made today, otherwise early next week. So that will get things started. The FERC regulatory process is not an exact science. It's not a -- there isn't a set number of days per se, but we don't see any reasons why it should be a prolonged process.

I would guide folks toward the middle of the third quarter for regulatory approval. Obviously, we would -- we're going to be using these proceeds to repay debt, so the sooner we close, the more interest we save on the debt we repay. So we're very focused on a speedy closing, and I know our friends at MARA Holdings share that view. So Hopefully, if we can do anything to accelerate closing, we will. But otherwise, yes, we feel pretty comfortable with the mid-third quarter target.

Okay. That's helpful. And then in terms of the holdco debt paydown, the plan is to pay down $300 million of debt there. And then it looks like there should be another $50 million or so of remaining cash from the transaction. So I guess, is my math correct there? And then if you have, call it, $40 million to $50 million of incremental cash, what's the plan for that? And then I guess related with the stock trading where it is, I mean do you think about authorizing some kind of a buyback just to support the stock a little bit?

Yes. Your math is correct. Final net proceeds will depend upon the timing of close, cash generated by Long Ridge between now and then, et cetera. So I don't have precision science. But you're right, there should be some excess cash. We can either use that to repay debt. We are permitted to just keep it on our balance sheet to fund acquisitions, and we've got a couple smaller situations that we think could be highly accretive in the rail space. And so we may choose to retain some of the cash to make those small investments. We have a handful of transaction fees as well that will crystallize at the moment of closing.

In terms of other uses for cash flow, look, I would just say we're, of course, always evaluating the various things we can do. We want to continue to grow the business. I still think the more likely use of proceeds is either to deleverage or otherwise invest accretively. But obviously, everything is on the table, and we and our board are always considering different options.

Next question comes from Craig Shere from Tuohy Brothers.

So Jefferson is doing well, obviously, with the new contracts kicking in, in November. The volumes are up, but it looks like the per barrel unit pricing is somewhat softening sequentially and even a tad year-over-year. Could you provide any color on that?

There's a lot in the mix there. What I can tell you is when you think about Jefferson's different business lines for refined products, crude oil and now ammonia. There are multiple contracts under which Jefferson provides those transloading services. I think a total of 7 contracts that Jefferson has with various customers, in some cases with 1 customer or multiple contracts or different destinations or rail handling or ship loading or whatever it may be. What I can tell you is there's certainly been no realized downward pricing for any particular contract or any particular product.

I think what's going on to affect those numbers is just a mix, a little bit more of a lower priced movement and a little bit less of a higher-priced moves, for example, crude oil. We have a crude oil. It's usually a higher rate because it requires more handling, sometimes it requires steam unloading and blending, and that can be at a much higher rate than then the refined products, which flow more easily and we handle more volumes of and so that's usually a lower price point. That doesn't mean 1 product conveys more or less margin. We may have a lower rate for refined products, but it's also a lot easier to handle. And so the margins, in some cases, may be better than crude oil, even though crude oil is a higher priced product. So there's a lot going on there. There has been no deterioration in price for any particular contract. It's just a matter of mix.

Got you. And maybe you could elaborate on the next steps for commercializing Repauno Phase 3 underground storage and potentially monetizing that business. Would it be reasonable to still think that could be accretively divested by mid-next year?

Yes, I think so. Yes. There's plenty going on with Repauno and the natural gas liquids global trade market. Spreads are as attractive as I think we've seen them for a number of years. There are supply issues and terminal loading issues in the Marcellus and Utica for liquids that would be destined to Repauno, but there is significant demand at very attractive pricing. So recently, just with the conflict in Iran, we've had increased dialogue with a number of large NGL producers. And so we like that, of course, that bodes very well for Phase 3.

I didn't talk much about -- I didn't talk at all about Phase 3, just in our prepared remarks because at the end of the day, Phase 2 is really our core focus, completing -- it's so important to Repauno, completing the construction and starting to demonstrate the $80 million of annual EBITDA. We are -- we and management are singularly focused on Phase 2. But Phase 3 is continuing. It's not to say we've slowed down at all. I think in order for Phase 3 to be fully financed, fully committed, fully contracted on the construction work, we want to have all the commercial contracts in place. So we're in a good market environment to do that.

Frankly, in terms of the monetization of the asset, yes, I think next year is certainly doable. It's been important to us, and we think any buyer would really want to see Phase 2 complete and operating. And hence, again, the reason why we're so focused on Phase 2. But yes, I feel pretty comfortable with next year being a good year to think about monetization of Repauno and quite possibly Jefferson.

The next question comes from Greg Lewis from BTIG.

I did want to go back to Jefferson. You kind of mentioned the incremental contract awards. How should we think about the scaling of that EBITDA from those existing service contracts that are going to start to ramp here?

There are a number of existing customers who basically want to expand the volumes that they put through Jefferson. Particularly in this market, folks are considering alternate sources for crude, additional markets for refined products. So the scale is, look, pretty significant. I mean we're moving 275,000 barrels per day. With the contracts that we are discussing with customers, the expansions of business, we're targeting total volumes of in excess of 500,000 barrels per day. We have capacity, operational capacity at Jefferson to probably do closer to 600,000 barrels per day.

We're pretty capped out with the existing infrastructure at that number. So at 500,000, we can handle all of that volume. It's getting to the point where there would likely be incremental capital beyond that. But we're running at just under a $60 million annual EBITDA run rate currently, an additional $50 million between 3 primary new pieces of business takes us over the $100 million mark. That's been a kind of an emotional level for Jefferson now for quite some time, and I'm really hopeful we can get all 3 of these expansions done this year. And put Jefferson in a place where we can hit those numbers.

Okay. Great. And then I did want to -- I did have a question on the relationship with U.S. Steel Transtar, realizing that, I guess, couple of weeks ago, U.S. Steel announced a major CapEx initiative at their Arkansas facility. Just kind of curious how you're thinking about that, realizing that currently we don't -- I don't believe we have exposure in that kind of a little pocket, but just how you think about that incremental volume of U.S. Steel there maybe creating more opportunities across the U.S. Steel rail network.

Yes, good noting that. Yes, unfortunately, Arkansas is not one of the Transtar properties. But at the end of the day, the folks at Nippon committed a total of $11 billion in new projects. The Arkansas invest is about $2 billion of it. So there's another $9 billion to go. We're pretty sure about $5 billion of that remaining $9 billion is going to be focused on the Mon Valley in Pittsburgh and Gary Works. They, Nippon and U.S. Steel have announced a handful of projects at both the Mon Valley and Gary work.

They're both a little bit smaller or involve refurbishing a blast furnace, not necessarily new construction. But we feel pretty confident that there are some additional projects coming that will be very good news for Transtar at some point during the course of this year. So it's a big commitment from Nippon and we're, of course, eager, but we won't be benefiting from the Arkansas announcement, but I do think there will be some announcements coming that should be good news for us.

Next question comes from Giuliano Bologna from Compass Point.

Congrats on the performance and the announced sale of Long Ridge. There is -- Switch topics a little bit. You're obviously deleveraging with the transaction. But until you have sold Jefferson or Repauno, how do you think you'd finance any incremental rail acquisitions?

Probably with incremental debt, I think it would be the most efficient way to do it. Brian asked earlier about maybe some incremental net proceeds and what we might use those for. So there will be some cash from the Long Ridge transaction that could be invested into a rail acquisition. Otherwise, look, we're repaying debt. That opens up new debt capacity. And I think it would be much more efficient for us, particularly where we're trading right now to be an issuer of debt to make an accretive acquisition. And so I feel pretty comfortable we'll have access to the capital we need for whatever acquisition opportunities come up at the railroad.

And are you seeing a good flow of rail deals in the market now? I mean, because in the past, you kind of mentioned that rail deal flow tends to be episodic and go in waves.

Yes, very definitely episodic. There are -- but we are -- the stars are aligning, I would say, there are 3 things driving an increase in activity. One is, of course, Class 1 mergers, both pending and under, I would say, speculation when two Class 1s get together, it's pretty likely there are going to be divestitures of various lines, and that opens up a set of opportunities, carve-outs of short lines and regional lines. And so I think that's going to stimulate some M&A activity.

Two, there was a lot of activity where private equity firms, institutional investors bought into rail sector 5 to 10 years ago. And most of those funds have 10-year lives. And so many of them are approaching their mandated monetization time frames. And so we expect the number of assets held by institutional investors to come to the market over the next, call it, 6 to 12 months. And then finally, when you really think back, there are a number of large properties that are owned by individuals, very entrepreneurial individuals who really established their ownership all the way back in the Staggers Act in 1980, and 40 plus years ago.

So they've owned these things for a very long time. They're starting to think about what they want to do going forward. Values have grown materially since they first entered the business and so we're having dialogues with a number of just individual owners, who are starting to think about it. And so I think those dynamics are at play. And I think we're going to have a nice wave of M&A opportunities here in the next 12 months.

This concludes our question-and-answer session. I would like to turn the conference back over to Alan Andreini for any closing remarks.

Thank you, Jason, and thank you all for participating in today's call. We look forward to updating you after Q2.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and thank you for standing by. Welcome to the FTAI Infrastructure Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Alan Andreini, Head of Investor Relations. Please go ahead.

Thank you, Shannon. I would like to welcome you all to the FTAI Infrastructure Earnings Call for the fourth quarter of 2025. 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 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. These statements, by their nature, are uncertain and may differ materially from actual results. We encourage you to review the disclaimers in our press release and investor presentation regarding non-GAAP financial measures and forward-looking statements and to review the risk factors contained in our quarterly report filed with the SEC. Now I would like to turn the call over to Ken.

Okay. Thank you, Alan, and good morning, everyone. Welcome to the call. As we typically do, we'll be referring to the earnings supplement, which you can find posted on our website. And I am going to get right into it, starting on Page 3. Adjusted EBITDA for the fourth quarter was a new quarterly record coming in at $80.2 million, up from $70.9 million for the third quarter of 2025 and $29.2 million for the fourth quarter of 2024. The $80.2 million of fourth quarter EBITDA excludes a $9 million gain in the quarter from a write-up of one of our noncore investments in Clean Planet Energy. Since we don't necessarily expect that gain to continue in the periods ahead, we're excluding it for purposes of this discussion.

For the full fiscal year of 2025, adjusted EBITDA was $232.3 million, up substantially from $127.6 million in fiscal 2024. Reflecting on the 2025 year, it was an extremely active one for FIP with many of the transactions we completed setting the stage for what we expect to be a highly productive 2026 ahead. It's important to note that as a result of the specific timing of closing of a number of investments during the year, our 2025 annual results reflect only a partial financial contribution from those events.

In February, we purchased the 49% of Long Ridge that we didn't previously own and started reflecting 100% of Long Ridge's results. In August, we purchased the Wheeling and Lake Erie Railroad, a transformative transaction for our Rail segment. And in November, we commenced activity under a new 15-year ammonia export contract at our Jefferson Terminal. As a result of these events, we exited the year at an EBITDA run rate of just over $320 million annually, meaningfully higher than our reported figures.

Flipping to Slide 4, I'll briefly talk through the highlights at each of our segments. In our Rail segment, adjusted EBITDA was $41.3 million, with Q4 representing our first full quarter of ownership of the Wheeling. We took active control of the Wheeling at the end of December and have begun to integrate its operations into our existing Transtar business. Of the total $41.3 million of adjusted EBITDA, $22 million was attributable to Transtar and $19.3 million was attributable to the Wheeling. I'll talk more about the Wheeling and our integration process here shortly, but we're thrilled with the Wheeling's early progress, and the business continues to exceed our financial expectations.

At Long Ridge, EBITDA for the quarter was $36.2 million, representing a new quarterly record. Q4 results included our planned October outage of 8.5 days as well as an additional one-time outage of 19 days in December for a steam turbine repair. We estimate that the additional outage impacted EBITDA by approximately $3.5 million for the quarter. Gas production for the quarter averaged approximately 105,000 MMBtu per day, also representing a new record for Long Ridge. The macro in the power space continues to be extremely strong, and we have been advancing several growth properties that should drive continued upside for the business in the years ahead.

At Jefferson, EBITDA for Q4 was $13.6 million and included approximately 1 month of results from our new ammonia transloading contract. Going forward, our results will include the full impact of that contract. So we expect Jefferson to continue to post growth in the first quarter ahead.

And at Repauno, construction of our Phase 2 transloading project continues to progress on plan. Once Phase 2 is operational early next year, we expect Repauno to be capable of handling over 80,000 barrels per day of natural gas liquids, generating approximately $80 million of annual EBITDA.

Moving to Slide 5 and our capital structure. Yesterday, we announced the closing of a new term loan of approximately $1.3 billion, the net proceeds of which were used to repay in full the bridge loan we issued in connection with the Wheeling acquisition last year. The new term loan represents the only debt at our parent level and carries a coupon of 9.75%. The loan is prepayable at any time at a premium that reduces over its 2-year term. And more importantly, any proceeds from the potential sale of Long Ridge, which we'll discuss further in a bit, will be used for repayment of the loan at a lower premium than would otherwise be payable. The net result of the financing is a stable balance sheet with potential for meaningful deleveraging in the coming months and a path to more substantial free cash flow as we progress through the year.

2025 was a highly productive year. And now with the refinancing behind us, we have a handful of important priorities we're focused on, and we briefly list those on Slide 6. First, the integration of Transtar into Wheeling is off to a great start. We'll provide some more detail on the specifics, but year-to-date, we've already implemented a little bit more than half of our total targeted cost savings of $20 million annually. The remaining cost savings should be implemented over the course of the first half of this year. Second, our plans to monetize Long Ridge continue to progress. It's a great asset in a great market environment for exploring a sale. Given the sensitive nature of the sale process, I'm not going to comment in detail other than to say that the process is continuing within our expectations, and we plan to report additional information to the market on our progress in the coming months.

And finally, we're focused on driving continued growth across our portfolio. Activity in the Rail M&A market is picking up, and we're currently pursuing a total of 4 opportunities that represent very good fits for our existing Rail business. In addition, we have been advancing negotiations for new contracted business at Jefferson, which we expect to complete in the current months and can contribute meaningfully to revenues and EBITDA with no additional capital requirements. And with development permits in hand for Phase 3 at Repauno, we're making good progress in advancing commercial activity and construction planning.

Moving to Slide 8. We'll dig a little deeper into the quarterly results and the activity at each of our segments, and we're going to start with the Rail segment. We posted revenue of $86.4 million and adjusted EBITDA of $41.3 million in Q4 compared with revenue of $61.7 million and adjusted EBITDA of $29.1 million in Q3. At Transtar, carloads, average rates and revenues for the quarter were stable. Coke volumes came in at slightly lower levels for the quarter, resulting from the incident at U.S. Steel's Clairton production unit that required the unit to remain down for the entire duration of the fourth quarter. Clairton returned to full operations in January and coke volumes have now recovered to normalized levels.

Transtar's operating expenses also continued to be stable as fuel costs and other material cost items have been largely unchanged. But the story for the quarter was at the Wheeling, where revenue and EBITDA came in at levels exceeding our early expectations. Total Wheeling fourth quarter revenue of $43.8 million was up 8% year-over-year, while Wheeling's adjusted EBITDA for Q4 of $19.3 million was up 34% year-over-year. We really just started our integration efforts after receiving STB approval for active control in the final days of December. So we plan to continue to see favorable year-over-year comparisons for the Wheeling in the quarters ahead.

Flipping to Slide 9, I'll talk a little bit more about our integration plans for the Wheeling. The integration of the 2 companies is underway, and I'm pleased to say that we're off to a promising start. We expect the combination of the 2 companies to result in 2 sources of financial gains. First, cost savings, which we expect to impact our results in the near term; and second, new revenue opportunities, which we expect to occur over the longer term. In terms of cost savings, we've broken out the totals into 2 components, those that have already been implemented and those that we plan to implement during the first half of this year. Implemented savings represent $10 million of annual incremental EBITDA, while savings in process represent the remaining $10 million of annual savings.

More importantly, on the revenue side, we continue to grow the list of opportunities now that the 2 railroads are operating as one. At U.S. Steel's Edgar Thomson Works facility, the first of a series of investments by Nippon Steel is underway with an announced $100 million investment in a new slag recycling unit. While it's a small investment compared to the total $2.4 billion committed by Nippon in U.S. Steel's Mon Valley complex, the new recycling unit is a rail-intensive one and will generate important incremental volumes and revenues for Transtar.

Also, additional propane carloads are planned to start early next year when Repauno's Phase 2 commences operations. Additional carloads of propane should be substantial given the volumes originate on the Wheeling and move to Repauno. And finally, the list of additional revenue opportunities on the combined system continues to grow. In total, we are now estimating over $50 million of incremental EBITDA potential from the various new sources of revenue manifesting in the future. Next, on to Long Ridge. Long Ridge generated $36.2 million of EBITDA in Q4 versus $35.7 million in Q3. Power plant capacity factor of 81% was impacted by the outages that I described earlier. But away from the outage, the fundamentals continue to be very strong with power prices averaging $45 per megawatt hour for the quarter and capacity revenue continuing at historically high levels and unaffected by the outage.

We averaged approximately 105,000 MMBtu per day of gas production versus the 70,000 MMBtu per day required at the plant, and we expect to maintain production significantly in excess of plant requirements and generate continued revenues from excess gas sales in the quarters ahead. Importantly, we continue to push forward a number of initiatives to drive further growth. The 20-megawatt upgrade in our power generation continues to advance, adding 20 megawatts of generating capacity at today's power prices adds $5 million to $10 million of annual EBITDA to the P&L. And with the strong macro environment driving historic demand for power against the limited supply of modern efficient power plants, we're advancing a number of opportunities that can provide substantial upside.

We continue in detailed negotiations with a potential purchaser of our land holdings, which would represent value creation from the land monetization as well as potential new revenue streams from on-site generation. In addition, we have been approached by parties seeking long-term PPAs at prices well above the current market. and potential partners have invited Long Ridge to co-develop new plants on sites within our region. With so much activity underway, we're confident that during the course of this year ahead, we can act on one or more of these opportunities and drive incremental growth for Long Ridge.

More importantly, these opportunities generate momentum for the sale process, which continues to progress. At Jefferson, we reported $23.5 million of revenue and $13.6 million of adjusted EBITDA in Q4 versus $21.1 million of revenue and $11 million of EBITDA in Q3. Volumes at the terminal averaged 210,000 barrels per day and revenue came in at a new quarterly record, driven by the start-up of the new ammonia export contract, which commenced in late November. We're in advanced negotiations for 3 new contracts with multiple parties to handle conventional crude and refined products as well as renewable fuels. Each of these 3 opportunities are with existing customers and involve expansions of the services we currently provide. 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.

We hope to execute on all 3 opportunities during this year and commence revenue shortly after execution. In total, the 3 opportunities represent in excess of $50 million of annual incremental EBITDA and utilize existing assets requiring little to no incremental investment or CapEx. And closing out with Jefferson, Phase 2 construction is proceeding as planned and toward our goal of construction completion by the end of 2026 with revenue commencing shortly thereafter. We have long-term contracts in place for a substantial portion of our capacity and are seeing high demand for the remaining available space. Based on the conversations we're having, we expect to commence revenue in early 2027 at full capacity. In the aggregate, we can handle a total of just over 80,000 barrels per day, representing $80 million of annual EBITDA for the combined assets of Phase 1 and Phase 2. While completing construction and commencing service is our priority, we're quickly turning toward commercial discussions for Phase 3.

Having received the permit during Q4 last year is a very big step toward advancing Phase 3 and achieving full build-out at Repauno. The permit allows for 2 storage caverns to be built, each capable of storing 640,000 barrels of liquids. So Phase 3 is currently planned to be twice the size of Phase 2. In conclusion, we're extremely happy with our team's progress during the fourth quarter, and we're very enthusiastic about 2026 ahead. We look forward to reporting updates on each of our key priorities. And now I'll turn it back to Alan.

Thank you, Ken. Shannon, you may now open the call to Q&A.

[Operator Instructions] Our first question comes from the line of Giuliano Bologna with Compass Point.

Congrats on another great quarter of execution there. As a first question, it's great to see Jefferson Terminal really starting to ramp up during the fourth quarter. Can you expand on the business development opportunities that you're seeing at Jefferson and the upside related to some of the contracts like the ammonia contract that should flip to a full quarter of impact?

Yes, definitely. Yes, it does feel like all cylinders are firing. We're excited about the year ahead, and Jefferson is an important cylinder. Yes, we -- we've really seen a pickup in the commercial interest and activity level at Jefferson. What we particularly like about, as I said, is these are all expansions of existing services. So these are opportunities that don't require the capital to build out new infrastructure and take the time to build out new infrastructure. One of the stories with Jefferson has been timing based, among other things. But this would be quick, no capital and just incremental volumes through existing assets. They break into 3 categories. The first is more ammonia. The ammonia system now at Jefferson South is fully built out.

The additional ammonia volumes that we're talking about would roughly double the quantities that we're currently handling. So that's somewhere between $10 million and $15 million of incremental EBITDA just for that opportunity. The second is for additional refined products leaving by rail. More gas stations are being built in Mexico, and therefore, there's more demand for gasoline and diesel, and we expect to increase volumes through that contract in the coming months. That could represent meaningful additional EBITDA, another $10 million to $15 million.

And then finally, Utah crudes. There's a lot of investment in the 2 major refineries in Beaumont in handling and producing various products for which Utah crudes are the ideal input. And so we expect to significantly increase inbound volumes of Utah crudes once we've expanded the existing contract. That could be substantial, roughly another $25 million of EBITDA. So look, we're very focused on it. It's certainly subject to execution. But having had a series of conversations with all these players over the years, we feel like the probability for each of these is as high as it's ever been.

Our next question comes from the line of Brian McKenna with Citizens.

Just a couple of quick questions on Repauno to start. I think Phase 2 was previously expected to be operational by the fourth quarter of this year. It seems like that's got pushed out a little bit here to the first quarter of 2027. So just kind of curious some of the puts and takes there. And then on Phase 3, I appreciate the detail in the prepared remarks, but it would be great just to get some additional color on what's going on behind the scenes here in terms of planning? What are the next few major milestones in the process? And then can you remind us, when do you expect to break ground on construction? And then when is that construction expected to be completed?

Yes. Yes, the timing, we've always been end of this year for Phase 2 and whether we commence operations December 31 or January 15, it's not a precise science. There's going to be some commissioning of that whole system. If you went to Repauno today, you'd see the tank largely built. So a lot of the important work that would typically cause any meaningful delays or cost overruns is behind us. All the geotechnical work and driving of piles is done. So we're at a point where I think we've derisked a fair amount of that construction. I don't see a lot of risk in any meaningful delays, but we will need to commission it. And as we've been talking about it, we want our customers thinking about very early 2027 rather than late 2026, just to be a little cautious there. But no change.

The good news is we are expecting to be fully utilized when we commence operations. There has been significant demand, and this feeds into your second question, what's driving that demand? And the simple answer is more supply and a need for accessing more demand markets. Natural gas production in the Marcellus and Utica continues to grow and with the gas comes the liquids. Demand for things like propane in the Northeast is stable, but not growing as significantly as production. So producers are looking for more outlets, more demand markets. There are only 2 terminals in ourselves and the Sunoco Logistics Terminal at Marcus Hook that these guys can really access for exporting large volumes over time. And so look, we're getting a lot of interest, and it's caused us to really refocus and push on Phase 3.

At this stage, there are a number of things we need to do to put a shovel in the ground on Phase 3. We're finishing up construction estimates and all of the planning around construction. We obviously have the permits in place and then the commercial development. Those conversations are underway. I don't see us starting construction and building Phase 3 on spec. We're going to want to have some anchor customers. So our goal would be have some anchor customers over the next 6 months, while in parallel, we're advancing all the construction elements and hopefully, sometime later this year, potentially pretty late this year, we're starting construction.

That's great. And then just switching gears a little bit, going to the Rail segment. You highlighted you're actively pursuing multiple new additional M&A opportunities. I think you said there's 4 there. I think this makes sense longer term, and you've talked about transitioning FIP to more of a pure-play freight rail company. But it's still early days of the Wheeling integration and driving synergies there. It sounds like there's great kind of momentum. But -- and then I guess, looking at the balance sheet, you've made great progress there as well, but the capital structure still has some moving pieces. I think there are still some opportunities to enhance that. So why not focus entirely on execution and integration this year, starting to drive EBITDA and cash flow even higher, you deleverage with any excess capital and then you kind of look to do some of this M&A in '27 and beyond.

Yes. Look, the M&A opportunities, good observation. We are -- we're a higher leveraged business than we expect to be in the coming years, and we're very focused on deleveraging. I think there's a lot of equity value to create as we deleverage and reduce our cost of capital, right? We have a higher cost of capital than we hope to have in a couple of years and deleveraging is going to drive that. The Long Ridge transaction, if successful, which we're expecting, will go a long way in deleveraging at the parent level.

Make no mistake about it. The priority #1 is maximize the benefits of the combined Wheeling and Transtar for sure. And management is doing a phenomenal job every day, focused on that. That said, M&A opportunities come to us. And when some of them are in the no-brainer category and maybe they are smaller situations, but even more accretive, we're definitely going to look at those. Something that is local, that is connected to the Wheeling or Transtar, where we think we can acquire assets at a 5x, 6x, 7x EBITDA multiple, double, triple EBITDA out of the targets. It feels like we have a duty to do that because it's just so accretive. But look, we agree with you. We have our priorities of deleveraging and optimizing the railroad we own today before we start growing. But we certainly are going to look at additional rail properties as they come up, particularly if we think they're a very good fit for us.

Our next question comes from the line of Sherif Elmaghrabi with BTIG.

Ken, sticking with rail for a sec. I think you gave some very nice color about your ideal acquisition targets. But can you talk about the M&A market for rail a little bit more broadly? How many opportunities are there that kind of bolt on geographically to your existing footprint? And could you look at anything else maybe a bit further away? I think there's a rail line in Texas, for example.

Yes. There are -- the M&A market in rail, and we've been doing rail stuff here for 20 years. It comes in waves. And it feels like the wave is coming at us and not going away from us. We're looking at 4 opportunities that are all very actionable. Three actually are smaller properties that are very natural fits for the Wheeling and Transtar. Meaning they connect or are nearby. One is not connecting. I really hope we can be the best bidder on the things that are close to us because we can certainly perceive the most value. They're not huge dollars, but they're highly accretive, and so they're certainly worth doing. And they're easy to integrate. Management won't be distracted and this is in their backyard. And so they're pretty much no-brainers.

But look, as more opportunities come, there was a big transaction announced earlier this week, and that was in a slightly different space, more like rail services and switching. But a couple of great companies that we've got a lot of respect for. My understanding was that transaction occurred at pretty sporty multiples. So if you can acquire businesses at single-digit multiples and own a portfolio that trades at mid-double-digit multiples, that's got to be a smart thing to do. Yes, look, we are staffed up and we're going at it. Our goal, as Brian said earlier, is to increase the scale of our rail portfolio over time at FIP. And I think we have a good shot at doing that.

Got it. Very helpful. And then shifting gears a bit, the sustainability and energy transition business contributed $9 million of EBITDA this quarter. Do you have a sense of what's going on there? And if that is something that will become -- or if this business is something that will become a regular EBITDA contributor?

Yes. I'm glad you asked actually. The answer to your last question is yes. We have a handful of investments we don't talk about much in noncore entities. Some of the investments are minority stakes. Clean Planet Energy is a fantastic company that is in the waste-to-energy business. They're based in the U.K. It's a global company. And years ago, we invested in a U.S. subsidiary. We set up a JV to build waste-to-energy facilities in the United States. That market, no surprise, has slowed down. And so we had an opportunity to exchange our 50% interest in the U.S. JV to a 49% stake in the global company. That was a great transaction. It resulted in a write-up of our holdings in Clean Planet Energy.

Look, I am super bullish on Clean Planet Energy. They've got a great management team. And I think they're focused on the right markets. Waste-to-energy is a huge business globally. It's not seeing a lot of activity in the United States right now, but across Europe and other regions, there's a lot to do there. And at Clean Planet, there is 1 facility under construction, 2 under advanced development. Yes, those will contribute EBITDA over the coming years and will record our portion of EBITDA. So I do think we will be reporting EBITDA. Given this single transaction, the exchange from an interest in the U.S. entity to the global parent, that's not going to happen again. And so when we were describing EBITDA for purposes of this call, we excluded that as a one-time gain. But I do think Clean Planet will be a contributor in the quarters ahead starting in 2027.

Our last question comes from the line of Craig Shere with Tuohy Brothers Investment Research.

Congratulations on the good quarter. To start with, is your asset sales process at Long Ridge impacting the data center discussions you're talking about? Obviously, if you can make progress there, it would certainly help with the value of any ultimate sale. Can you give us any more color about the timing of the monetization process? Would there be -- would you expect any serious tax implications to it? And if you had, I don't know, call it, $450 million, $500 million in net proceeds, what are your thoughts about allocating something like that?

All good questions, and I'm going to do my best within the limits of, I think, what we'd like to say on this call as it relates to the sale process. Your first question about the level of activity, data center developments. No, there's no impact, the parties that are looking at Long Ridge are all very well capitalized and interested in data center development and other land uses and on-site generation. And any party we're talking to about utilizing the land would be very comfortable were someone else to own Long Ridge as long as it's a well-capitalized counterparty. So we're pushing hard to advance all the opportunities.

I completely agree, of course, as those opportunities advance, the visibility of value creation at Long Ridge becomes that much more clear. And so it's nice to have commercial momentum when you're in the midst of a monetization process. In terms of timing, look, I'll -- our goal would be to have an announced transaction, I'm just going to say, in the first half of this year. In terms of what the transaction would mean, look, it would be significant for us, hundreds of millions of dollars of net proceeds. I'm not going to go beyond that in terms of quantifying our expectations, but we set out with a certain expectation. And so far, we are certainly trending in line with those expectations.

No, there wouldn't be much of a tax drag on the sale. The beauty of being in the development business is for better or for worse, you generate a fair amount of net operating losses over the time of developing assets. And so no, we don't expect there to be much tax leakage. So most of the gross proceeds after debt repayment should flow to FIP. And finally, what do we do with those proceeds? I think we'll probably deleverage mostly. It will be a really good thing for us. It may give us an opportunity to actually refinance this loan we put in place. We deliberately put a loan in place that is not of very long-term duration that limits the prepayment premium. And so we negotiated an even lower premium with proceeds from the Long Ridge sale. So it gives us the flexibility to deleverage initially. Brian asked about some of the rail acquisitions. So obviously, we'll be disciplined. But needless to say, we're focused on deleveraging. I think you should assume we use proceeds from the Long Ridge sale to deleverage high-cost debt.

Got you. And how far down does new Phase 3 underground storage cavern development have to go? How far down the road does it have to go before thinking about monetizing that business as well?

I just think the more -- the closer we get to operational completion, the more value any buyer would perceive. So it's not a precise science. I think you certainly need construction underway and commercial contracts, right? Then you have the certainty. I think the team at Repauno has done a great job delivering on constructing. And I think any buyer of Repauno would give us credit for being able to get the job done. But at a minimum, we've got to get through the next 6 to 9 months and be under construction and at least have anchor customers for Phase 3 before we considering monetizing that asset.

Right. So if that's a 2026 goal, the idea that this could monetize, I don't know, by the first half of next year is not unthinkable.

Correct. Yes. I think that's a good way to think about it.

I would now like to hand the conference back over to Alan Andreini for closing remarks.

Thank you, Shannon, and thank you all for participating in today's conference call. We look forward to updating you again after Q1.

This concludes today's conference. Thank you for your participation. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Q3 2025 FTAI Infrastructure Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Alan Andreini, Investor Relations. Please go ahead, 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 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 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. 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.

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 an extremely active one. In our Rail segment, we closed on the acquisition of the Wheeling & Lake Erie Railway, a transformative transaction in many ways and expect 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 plants consumption.

And most importantly, the company delivered strong financial performance. 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 5 weeks of contribution from the Wheeling, which we closed into a voting trust on August 25 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 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 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 had 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 Transtar Wheeling platform, behind-the-meter developments at Long Ridge or any further activities at Jefferson and Repauno.

Flipping to Slide 4. I'll briefly touch on the highlights at each segment. At our Rail segment, adjusted EBITDA was $29.1 million, which included $8.4 million attributable to the Wheeling for the 5 weeks we owned the company. On a stand-alone 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 lay 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 MMBtus per day across our gas production operations, we anticipate Long Ridge to achieve its $160 million annual EBITDA run rate in this fourth quarter.

At Jefferson, EBITDA 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 EBITDA.

And Repauno construction of our Phase 2 transloading project is fully funded and progressing on plan. We have 2 contracts and 1 LOI in place at Repauno for Phase 2 that together represent $80 million of annual EBITDA once operational. And earlier this month, Repauno received a 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. First, we'll take active control of the Wheeling immediately upon approval by the Surface Transportation Board. The timing is a bit uncertain, but given the current federal government shutdown, but 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.

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 position with a strong long-term balance sheet that allows us for deleveraging over time.

Moving to Slide 6. I'll talk a little more about the capital structure. Our capitalization at the end of September reflected the 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 nonrecourse 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. 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. The result is more than ample cash flow beyond debt service for reinvestment or deleveraging. In addition, any proceeds in the event of the 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 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 Transtar, overall carloads, average rates and revenues for the quarter were stable.

Coke volumes came in lower for the quarter, resulting from the incident at U.S. Steel's Clairton 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. Transtar 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 at Transtar 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 2Q. 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. 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 9, 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 Transtar 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 2 companies generated combined annual EBITDA as is of $164 million, with $83 million attributable to Transtar and $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, Repauno customers plan to source natural gas liquids from fractionators located directly on the Wheeling rail system. Total quantities represent about 30,000 carloads annually. At current market rates per carload, that's approximately $20 million of incremental annual EBITDA at the Wheeling.

The second revenue opportunity is a Transtar where additional freight volumes into and out of U.S. Steel's 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 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. 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 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 -- sorry, 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.

And we continue to see more inbound interest from behind-the-meter projects. 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. 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 2 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. 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 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 EBITDA for Phase 2. The 2 contracts are each for 5-year terms commencing upon completion of Phase 2 construction, while the third letter of intent is for 5 years with a 2-year extension at the option of our customer.

And we're excited to have announced earlier this month that Repauno 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 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 the 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.

[Operator Instructions] Our first question comes from the line of Giuliano Bologna with Compass Point.

Congrats on a very impressive quarter and this quarter. As a first question, it's pretty clear that FTAI is evolving into -- evolving from being a development company to being much more of an operating company. And 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. And 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. I mean 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. But that's just a quarterly thing. Across the year, the aggregate expense is something we expect to stay relatively consistent, Giuliano.

That's helpful. And now that you've completed the acquisition, can you give us some examples of the synergies that you'll really get between Wheeling and Transtar having those 2 businesses together?

Yes, 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 getting it going on a long list of opportunities. I mean we talked about the $20 million of cost savings and efficiencies. 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, et cetera, et cetera. 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. I mean, an example would be where today, Transtar 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 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. And that just means more revenue for us. And then we'll still hand it off to the same railroad or maybe a different railroad at the end. But 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 Transtar and want access to the Ohio market in a more simple and direct way or vice versa, customer in Ohio who wants access to the Pittsburgh market, we now can provide that access holistically. 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 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. So I do think there's some, hopefully, upside in those targets we've laid out.

That's very helpful. And maybe a quick follow-up on a very similar topic. Now you have a sale platform with Wheeling and Transtar together. If you do more acquisitions going forward, what kind of synergies do you think you can realize by having a dorsal platform and continue to add tuck-in acquisitions even if the acquisitions are not physically next to the current system?

Yes. Yes. I mean I think bigger is better. And this is something we've done with our historical rail investments and each incremental investment is that much more accretive. So 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. And so -- and 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.

Our next question will come from the line of Brian Mckenna with Citizens.

It's great to see all the momentum in the Rail segment, specifically with Wheeling. I appreciate all the detail on the quarterly trends and then the near-term and the longer-term outlook. But do you have an updated time line around STB approval? And then 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. I mean what I can say is look, yes, the federal government shutdown does affect the Surface Transportation Board. So 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. And so our assumption is when the government reopens, this will be -- continue to be a high item on their list of priorities. Yes, I think it's hopefully sooner versus later. It's anyone's guess as to when the government reopens, but hopefully, shortly thereafter, we should get the green light.

Okay. That's helpful. And then just a follow-up on the Rail segment. So how much cash did the segment generate in the quarter? And then is there a way to think about kind of the full quarter run rate of cash generation within the Rail segment? And then again, 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?

Yes. 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 Transtar was near 0. CapEx at the Wheeling was, I want to say, $6 million or $7 million. It's a little higher in Q3 for them with a number of big projects that they took care of during the warmer weather will not be that high in the fourth quarter. So it's not necessarily a great indication of CapEx to come.

But call that cash flow, let's just say, on a normalized basis of about $35 million, rounding up $32 million to $35 million. All of that cash will be available to shoot up to our parent, and it will 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. And so -- 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, that will depend in part upon the investment opportunities we see at the time. Look, deleveraging, I think we view would be a good thing for us and the debt we're putting in place will certainly be one we could deleverage with. Obviously, we talked about Long Ridge as well and with that transaction, should it occur, there'll be meaningful deleveraging as well. So I think that excess cash right here, absent a highly accretive investment opportunity, we would probably use to deleverage over time.

Yes. Okay. That's great. And then just one final question for me real quick. Just 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. And so that's the first part of the question. And then just in terms of the specifics, like does an 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?

Yes. So 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 will be at least 5 years or pricing, if that's okay. I just -- we're going to commence the marketing process here shortly. So I'll just -- I'm going to leave that to the side for now and maybe we can comment on that once we start the marketing. But look, it's going to be a bond, not terribly different than the bond we previously had outstanding.

The previous bond was a 5-year term, no call to I think you should expect something generally similar to that. I like a shorter call protection period because with the ramp-up in cash flow, particularly the cash that will be coming from Jefferson and Repauno starting throughout the next 12 months, we're going to want to use cash to deleverage and having a shorter window of expensive premiums and call protection, I think, will be advantageous for the company. But outside of that, it will be a typical senior notes offering.

Our next question comes from the line of Greg Lewis with BTIG.

I would love for you to talk a little bit about Repauno. We saw the news about getting the permit for Phase 3. Kind of curious what 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?

Greg, thanks for the question. Yes, it was a marathon getting here, needless to say, obtaining the Phase 3 permit was a lengthy occurrence, but we're thrilled to be where we are and now is when the sprint portion of the development begins. We are -- 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 a tremendous expansion of the asset. Phase 3 represents effectively a doubling of what Phase 2 is. Phase 2 is 1 aboveground storage tank at just over 600,000 barrels. Phase 3 as permitted is 2 underground caverns each at 640,000 barrels.

So it is a big deal, a game changer for the economics of Repauno. We have a great macro with continued demand for export and gateways out of the East Coast. We are effectively sold out on Phase 2. And so we're eager to get going on Phase 3. What we need to do is finalize some of the construction contracting. Our estimates today, estimates are that building 1 cavern, 1 cavern would take about $200 million. Whether there would be additional handling systems connected to that cavern or not will depend upon the ultimate throughput and what have you, generating about $70 million to $80 million of annual EBITDA. So the economics are pretty compelling. I mean it's like a 3-year payback.

Timing will depend upon the competitive bidding with our contractors. It's realistically probably between 2 and 3 years to build a cavern. If we build 2 at the same time, it would be the same time frame. It's not like a sequential event. But look, the economics are wildly compelling. The macro is super. And so 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 color. And then my other question is around Long Ridge. You highlighted the potential strategic alternatives. I wanted maybe a little bit more detailed question. What is the -- how does it -- how should we think about Long Ridge as a power generation facility versus the natural gas wells, which are outside of that? And 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? And could we see a scenario where maybe we maintain those natural gas wells for the production? Just kind of curious how we should be thinking about how this plays out?

Yes. 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. So I would 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. It is, of course, possible, you're right that the buyer prefer to just take the plant and the land, we keep the gas that 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. 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 power swap sales. And I think maintaining that balance and that integrated aspect of the asset is actually an important thing and the buyer universe appreciates that. So I think it's possible. It could end up being cut in 2, if you will, with 1/2 sold and 1/2 kept. My view right now is that's less likely.

And I would now like to hand the conference back over to Alan Andreini 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 for participating, and you may now disconnect. Everyone, have a great day.

Good day, and welcome to the Second Quarter 2025 FTAI Infrastructure Earnings Conference Call. [Operator Instructions] As a reminder, this call may be recorded. I would now like to turn the call over to Alan Andreini, Investor Relations. Please go ahead.

Thank you, Michelle. I would like to welcome you all to the FTAI Infrastructure Earnings Call for the Second Quarter of 2025. 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. These statements, by their nature, are uncertain and may differ materially from actual results. We encourage you to review the disclaimers in our press release and investor presentation regarding non-GAAP financial measures and forward-looking statements and to review the risk factors contained in our quarterly report filed with the SEC.

Now I would like to turn the call over to Ken.

Okay. Thank you, Alan, and good morning, everyone. Welcome to our earnings call for the second quarter of 2025. We're going to walk through the details for the quarter as we typically do. But first and foremost, we want to get into the details of 2 important developments for our company. Just 2 days ago, we announced a major acquisition that we expect to transform our freight rail segment. In addition, we plan to refinance our corporate balance sheet in a manner that materially increases our free cash flow and provides ample flexibility for future growth. These 2 transactions tee us up for what we expect to be a dynamic second half of 2025 and multiple opportunities for long-term growth in the years ahead.

For the call today, we'll be referring to the earnings supplement, which you can find posted on our website, and I'm going to kick things off on Page 3 of the supplement with some details on the acquisition. We signed an agreement earlier this week to acquire the Wheeling & Lake Erie Railway, one of the largest regional freight railroads in the U.S. for total cash consideration of $1.05 billion. In the freight rail sector, the Wheeling & Lake Erie has been a highly sought-after asset given its strategic location, customer diversity and growth potential, and we are thrilled to have had the opportunity to negotiate a transaction and combine it with our Transtar business. The Wheeling operates roughly 1,000 miles of track in the states of Ohio, Pennsylvania, West Virginia and Maryland.

The Wheeling is a great fit for a combination with Transtar. The map on the left side of Slide 3 says it all. The geographic overlay of the 2 businesses allows us to realize multiple immediate efficiencies and capitalize on a number of growth opportunities. For the latest 12 months, the Wheeling generated total revenue of approximately $150 million, serving a diverse base of over 250 customers and a broad range of commodities.

On Slide 4, we'll walk through our integration plan and our financial expectations for our combined rail platform. We expect to consummate the acquisition quickly and are preparing for closing later in this month of August. We'll close initially into a voting trust while we await formal approval for active control from the Surface Transportation Board. Closing transactions like this into an interim voting trust is relatively common in the freight rail sector, and it's something we at Fortress have done a number of times since it allows us to immediately execute on the transaction and benefit from the revenue and cash flow that the Wheeling generates while allowing time for the mandated regulatory process to be completed. We currently expect regulatory approval around the end of 2025. While the Wheeling is held in a voting trust, we have asked John Giles, the former CEO of RailAmerica to act as trustee on our behalf.

John is an incredibly seasoned freight rail industry executive. He helped us grow RailAmerica during our ownership, more than doubling the EBITDA of RailAmerica over our 4 years of ownership. We do expect this to be a highly accretive investment, and we're targeting annual EBITDA of the combined rail companies of at least $200 million by the end of 2026. The building blocks to that target are provided in the bar chart, and I'll walk through the pieces. For the most recent second quarter, the 2 companies generated combined annual EBITDA as is of $150 million with $83 million attributable to Transtar and $63 million to the Wheeling. We expect $20 million of annual cost savings to be implemented in the near term at the Wheeling with the bulk related to network efficiencies, including quicker transit times, optimized use of assets as well as capitalizing on purchasing power and a variety of cost savings.

Our $20 million target is comprised of a detailed line item-based work plan that Jon Carnes, current CEO of Transtar, will implement together with Wheeling's senior management team. We expect the entirety of these savings to be implemented in the next 12 months. The next 2 components relate to high confidence revenue opportunities. The first is a unique opportunity related to our Repauno terminal. Our Phase 2 project at Repauno will handle large volumes of natural gas liquids for export. Those liquids include propane and butane being sourced from fractionators located directly on the Wheeling's rail system. Starting late next year, a unit train each day will be loaded, representing 80 carloads daily or about 30,000 carloads annually. At current market rates per carload, that represents $20 million of annual EBITDA at the Wheeling. Recall that those volumes are contracted at Repauno for a total of 5 years, so we have high visibility into that revenue stream.

The second revenue opportunity is at Transtar, where additional freight volumes into and out of U.S. Steel's 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 10% to 20% increases in shipments or approximately $15 million of annual EBITDA. Nippon is also committed to building a new production facility, which may be located on one of Transtar's existing rail lines. If that transpires, we expect substantial additional EBITDA not included in this bar chart.

The bar chart also excludes continued pricing gains, third-party revenue growth at Transtar and a pipeline of new business opportunities at the Wheeling. Given the diversity and growth profile of the combined business, we believe we now own a rail asset that could trade at industry multiples that historically have averaged 15x EBITDA. With at least $200 million of targeted annual EBITDA after deducting $1 billion of preferred stock at the rail level that I'm going to discuss shortly, that implies significant value creation that ultimately flows to our common shareholders.

I'm now going to shift to the financing that we are closing together with the acquisition. The financing has 2 components. First, we're issuing preferred stock at a newly formed subsidiary that will own the combined Transtar and Wheeling assets. Total preferred issuance is $1 billion with proceeds used to fund the bulk of the acquisition purchase price. The preferred is being purchased by affiliates of Ares Management and will carry a 10% annual dividend rate, which will be noncash paying, meaning all the cash flow generated by our combined rail business will be available at our corporate holding company level. The preferred will also receive warrants at the rail company that allow the investor to participate at a strike price at our investment basis in the value that we create over time. The warrants are only being issued at the rail entity and not at our publicly traded parent, so there is no dilution to our publicly traded equity.

Secondly, at the corporate level, we are issuing $1.25 billion of new debt to refinance our existing 10.5% senior notes and our existing Series A preferred stock and fund working capital. The new debt will carry an interest rate of [ S plus 400 ] or roughly 8.25% annually, having a positive impact on our leverage and cash flow position. Cash fixed charges today at FIP of just over $130 million annually will drop by $30 million to just over $100 million annually going forward. Cash generated by our rail business and distributed up to FIP will more than double on a pro forma basis for the acquisition. So coverage ratios and excess cash generation will be materially higher going forward. The $1.25 billion in corporate debt is initially being funded in the form of a short-term bank loan, which we plan to refinance during the fall this year with a new long-term bond issuance. We expect the terms of the new bond to be less restrictive than our existing debt, providing flexibility and access to additional debt in the future to continue to invest in accretive opportunities.

Now on to our current business. On the quarter, adjusted EBITDA was $45.9 million for 2Q, up 30% from the first quarter of 2025 and up 34% from the second quarter of last year. Sequential EBITDA grew at each of Transtar, Long Ridge and Jefferson. And Repauno in the second quarter continues to reflect only Phase 1 operations while we progressed construction at our highly accretive and contracted Phase 2 transloading system. With contracted business commencing during the remainder of this year and the Wheeling acquisition, we expect 2025 to be transformational for our company, demonstrating substantial growth in revenues and EBITDA. As the bar chart on the right side of the slide illustrates, we have a line of sight across our portfolio on just over $350 million of annual EBITDA before the impact of the acquisition. Including the acquisition, we expect annual EBITDA to exceed $450 million. Importantly, our targets exclude a number of growth opportunities, including additional volumes at Transtar, data center developments at Long Ridge and Repauno's Phase 3 terminal project.

Touching upon the key highlights at each of our companies. At Transtar, adjusted EBITDA of $20.7 million was up 4% from the first quarter as volumes, average rates and revenues remained steady for the quarter. During the quarter, Nippon Steel officially closed on the acquisition of U.S. Steel., and in doing so, crystallized the commitments for substantial investments in U.S. Steel's largest production facilities in Pittsburgh and Gary. We've already seen some pickup in volumes here in the third quarter and expect the bulk of volume increase to impact 2026 and the years ahead. At Long Ridge, reported EBITDA for the quarter was $23 million, up from $18.1 million in Q1. The second quarter results included the impact of a 14-day planned maintenance outage and reflected only a portion of the increased capacity revenues, which commenced on June 1. By the end of this third quarter, we expect Long Ridge to reach annual run rate EBITDA of $160 million, which includes the impact of increased gas sales coming out of our West Virginia resources commencing production in this month of August.

At Jefferson, EBITDA was $11.1 million, up from $8 million in Q1 as we brought 4 storage tanks previously off lease into service at the beginning of the quarter. It's an important second half of the year ahead for Jefferson as we have $20 million of long-term annual EBITDA commencing under 2 contracts, each with minimum volume commitments. And Repauno, we completed financing for our Phase 2 transloading project. We issued $300 million of tax-exempt debt at average pricing of 6.5% to fund construction and a number of reserve accounts. Importantly, we signed an additional letter of intent for our Phase 2 project, bringing our total volumes under contracts and LOI to just over 70,000 barrels per day and representing a total of approximately $80 million of annual contracted EBITDA.

Starting on Slide 10, I'll get into some more detailed quarterly figures at our segments before wrapping up the call. Digging a little bit more into Transtar. We posted revenue of $42.1 million and adjusted EBITDA of $20.7 million in Q2 compared to revenue of $42.6 million and adjusted EBITDA of $19.9 million in Q1. Carloads, average rates and revenues for the quarter were largely unchanged versus last quarter. Operating expenses also continue to be stable as fuel costs and other material cost items have been largely unchanged.

Earlier on the call, I described our expectations resulting from Nippon's acquisition of U.S. Steel, but we continue to drive third-party customer growth on each of Transtar's railroads. Also, while the combination with Wheeling is our primary focus in the near term, we are actively pursuing additional acquisitions of complementary railroads that further diversify our revenue and commodity base and open up additional growth opportunities through an expanded platform. We very much expect freight rail to grow as a percentage of our total assets in the quarters and years to come.

Next on to Long Ridge. Long Ridge generated $23 million of EBITDA in Q2 versus $18.1 million in Q1. Power plant capacity factor was 83%, reflecting the 14-day maintenance outage that we took in May. We typically take outages twice a year and try to plan them during periods of lower power demand in the spring and early fall to minimize the financial impact. In 2Q, the outage represented approximately $3 million of EBITDA that did not materialize while the plant was down. Gas production averaged about 64,000 MMBtu per day. We're bringing our West Virginia gas production online later this month, resulting in a substantial increase in production and allowing us to generate incremental revenue and EBITDA from excess gas sales.

Higher capacity revenues kicked in on June 1, representing approximately $30 million of additional annual EBITDA. As I mentioned earlier, the reported results of Q2 reflect only this 1 month of the higher capacity revenue. So we expect to report significantly higher results in Q3 just by virtue of reflecting a full period of capacity revenue. And the 20-megawatt upgrade in our power generation continues to advance, and we expect to receive authorization at some point here in the remainder of 2025.

With a solid first half of the year behind us, our focus now is advancing multiple behind-the-meter projects, including most notably negotiations with data center developers. Based on the current state of discussions, we continue to anticipate entering into one or more transactions for data centers at Long Ridge during the remainder of 2025. On to Jefferson. Jefferson generated $21.6 million of revenue and $11.1 million of adjusted EBITDA in Q2 versus $19.4 million of revenue and $8 million of EBITDA in Q1. Volumes were higher in the first quarter and average realized price per barrel was higher as the 4 tanks, which were previously off lease returned to service on April 1. As discussed, we have 2 contracts, representing a total of $20 million of incremental annual EBITDA commencing during the second half. In addition, we are in late-stage negotiations for additional contracts with multiple parties to handle conventional crude and refined products as well as renewable fuels with some of these negotiations involving business that would commence this year in 2025.

And closing out with Repauno, we closed our tax-exempt financing for Phase 2 in May. Construction is well underway for the aboveground storage tank, manifolds and additional rail unloading capacity. We have 2 customers signed up under the long-term contracts and the additional customer with whom we're advancing the letter of intent. In the aggregate, these 3 pieces of business represent volumes of 71,000 barrels per day and $80 million of annual EBITDA. The 2 contracts are each for 5-year terms commencing upon completion of the Phase 2 construction, while the third letter of intent is for 5 years with a 2-year extension at the option of our customer. Phase 2 remains our current priority, but we're excited about the advancement of the next phase at Repauno, including the development of additional underground storage for which we expect to complete permitting prior to the end of this third quarter.

In conclusion, we are extremely happy with our team's progress during the first half of the year. We're even more excited than ever about the opportunities that lay ahead. The Wheeling acquisition and the refinancing transform our company and set the stage for meaningful growth in the quarters to come.

I'll now turn the call back to Alan.

Thank you, Ken. Michelle, you may now open the call to Q&A.

[Operator Instructions] And our first question comes from Giuliano Bologna with Compass Point.

Congrats, Ken, on continued execution on the Wheeling transaction. As a first question, can you talk a little bit more about the synergies of putting Transtar and Wheeling together?

Yes, absolutely. We've been active in the freight rail space now for roughly 20 years between RailAmerica, where we made a number of acquisitions, the FEC and the Central Maine & Quebec. And so combinations, acquisitions, integration of rail assets is something we and our management teams have had a good amount of experience in. I feel really good about the $20 million of annual savings between the 2 companies. It's a long list of individual items, but they're very discrete. There's a little bit of upfront cost to implementing these savings. But once you invest, you stick with them. I mean the map on the first slide of the presentation, I think, was very important. I mean this is a perfect fit and the types of efficiencies that we can realize immediately upon closing of the transaction are incredibly meaningful. I am highly confident that the $20 million of annual cost savings is something we will certainly be realizing in the next 6 to 12 months.

That's very helpful. And then as a follow-up, you spoke in the past about the importance of diversification in the short line rail space. Can you expand on that and the implications that this deal has on the combined transfer?

Definitely. Yes, I'm glad you asked that. I do think that this transaction is a game changer for the overall value proposition of our rail platform. Diversification, I mean, Transtar is a super rail asset, and it's been growing, generating significant cash flow. It has some great attributes. It does not have a tremendous amount of diversification in terms of its customer. Transtar is 85% of our existing business. Pro forma for the combination with the Wheeling, Transtar, U.S. Steel will become 1/3 of our total business. We're adding 250 customers and a whole bunch of different commodities into the mix for the combined company. What that means is, as I said in some of my prepared remarks, I think it's a significant uplift in the implied multiple when you think about valuing the business.

Diversified freight railroads consistently trade in the mid-teens. There have been probably 20 transactions over the past 5 to 10 years in the rail space, including a big one most recently with the UP, Norfolk Southern news, which, by the way, occurred at just north of 15x EBITDA. I really feel comfortable that now we have a business that trades in line with those industry multiples, and that's great. I'm not sure Transtar on a stand-alone basis would trade at that multiple. It might, it might not, maybe it's a 12 or something like that, but the diversification gives us that kind of multiple expansion opportunity. And I think it's a big thing for our common shareholders.

Our next question comes from Greg Lewis with BTIG, LLC.

My first one was kind of, I guess, a continuation of Giuliano's questions on the rail. I mean, you called out the Union Pacific deal. And obviously, now with you guys acquiring Wheeling. Has something -- has anything changed here in the last year that's kind of making -- that's driving this maybe pickup in consolidation in the rail space? And do you see continued opportunities to kind of continue to bolt on potential other [ short ] rails?

Yes. The UPNS deal, I won't comment much on. We obviously have a very business-friendly administration, and I'm sure that's part of the atmospherics. Generally, our experience has been that these rail transactions and M&A activity tends to come in waves. And there have been a handful of transactions over the past 12 months. We're aware of a number of opportunities over the next 12 months, and we're in a dialogue with a handful of counterparties. I can't say anything has fundamentally changed in the industry.

It's an industry that's been around for about 150 years. So -- it's one of America's oldest industries. So nothing fundamentally has changed, but I can say we are seeing, I'd say, a mild pickup in activity. Look, more importantly, we, as a buyer, are much more potent and competitive than we might have been last quarter. The combination with the Wheeling, scale allows us to integrate additional railroads, either regionally focused or elsewhere and finance additional acquisitions at a lower cost and more readily. So hopefully, we continue to see a good pace of opportunities. I think we're better positioned to act on them than we were yesterday. And so we're excited about that.

Okay. Great. And then just on Long Ridge, I appreciate the prepared comments. As we kind of think about the opportunity there in the EBITDA bridge, you called out $70 million of opportunity. Could you maybe talk what's in there and potentially what's not in there? It looks like it came down sequentially. Clearly, I'm kind of curious about the 20 megawatts that you potentially have in development and anything else that maybe you could comment. Maybe you mentioned data centers again. Could you kind of talk about what's in that $70 million and what's not?

Yes, definitely. So yes, I'm glad you asked. We try to communicate in that bar chart only revenue and EBITDA, in particular, that is locked in. The -- you mentioned something that I'll respond to looked like the $70 million came down. The way that we show things in that bar chart is we take the total contracted EBITDA for each asset. And then we just show the increment from what is already reported in the most recent quarter. And so the number and expectation for Long Ridge has not come down. It sat at $160 million. But over time, how much of it is baked into the bar on the left versus how much is on the come, more will be shifted to the bar on the left and less on the come as we pass through a number of quarters.

Long Ridge, in particular, has been a very dynamic business segment for us. One, because of the financing activity and the consolidation of the business in Q1; and two, in Q2 here because of higher capacity revenues and in Q3, we'll see materially higher EBITDA from Long Ridge as we reflect both the full quarter's capacity revenue and the excess gas sales. And so what you'll see over time in that bar chart, I am guessing these bar charts for the next quarter is the left-hand bar will get bigger and the increments as we make our way to the right, if nothing else changes, will become smaller because more of the actual financial contribution will be in the reported results.

Outside of that, what's not in the results, I mean nothing regarding data center opportunities that could be -- we've spoken before. I think a data center opportunity may add $75 million of annual EBITDA. That's not in the bar chart. The new 2026, 2027 capacity revenue and auction results, which, by the way, are now at a new record, and we just saw PJM capacity revenue increase for next year from $270 per megawatt day to $329 per megawatt day. That is a new record. That uplift is not in the bar chart. Up rates and other elements of the business are not in the bar chart. Only what is in the bag contracted is included in those bar charts.

Our next question comes from Brian McKenna with Citizens.

Congrats on all the announcements this week. Ken, it would be great to get an update on Phase 3 and the caverns at Repauno. Where do things stand in terms of finalizing the permitting process? And then can you just remind us of the financials of the project, what the time line could look like from start to finish? And then really, how are you thinking about the long-term value creation opportunity here?

Great. The permitting of Phase 3 has been -- it's certainly been a lengthy process. We, of course, do not control the pen. The New Jersey DEP is the final authority on awarding the permit. We have been informed that a final permit -- signed final permit should be in our hands by September 30. So that is our current expectation, and we don't have any reason to be hesitant around that date. Phase 3 could be ultimately very significant. Our initial plans are to develop 2 underground caverns of 600,000 barrels each for 1.2 million barrels. Total cost to do so would be about $200 million. The beauty of caverns is they are less costly to build and they last forever. They're much, much easier to maintain. So about $200 million of upfront capital.

And just using our Phase 2 contracted rates, that represents about $100 million of EBITDA. So the payback is a 2-year payback on assets that live for 50 to 100 years. So it is an extremely attractive investment. The -- we financed it with additional tax-exempt debt. We just had some great success in the market during 2Q, raising $300 million. We launched that transaction at a 7.5% coupon. There was plenty of demand, and we were able to bring the coupon down to a 6.5% blended coupon. So we're really happy and very much appreciate the support from the tax-exempt investor market in that transaction. And we'd love to come back to that market for more capital for Phase 3 when it's ready to go.

Okay. That's great. And then I guess just one follow-up there. Just in terms of the construction time line for Phase 3, I mean, roughly how long will that be?

It's about 2 years, about 2 years from beginning to end.

Yes. Got it. Okay. Cool. And then a follow-up on Repauno as well. Just Phase 2 construction, how is that going thus far? And then I guess just from the outside, are there any major milestones we should be watching just in terms of the progress there and ultimately marching toward the 4Q '26 start date?

Yes. Everything on time, on budget, going great. The team that is administering construction is the same team that built everything we own today at Jefferson. I mean, Jefferson is on the construction front, a great success story. Virtually everything we built at Jefferson has been on time, on budget. A good chunk of what we built was during the pandemic with supply chain issues, but the team did a remarkable job keeping things in line with budget and time frames. Essentially, it's just going to be a continuous process. I can't say there are particular milestones per se. We need to complete the project in Q3, so we can commission and have it operating in Q4, and I'm confident our team is going to be able to do that.

Okay. Great. And then just last one for me on Long Ridge. Just given all the demand for power in the PJM, have you seen an increase in reverse inquiries for both power as well as the power plant?

Yes. The -- definitely getting plenty of inbounds on Long Ridge. A fair amount of interest in the asset. It's a dynamic time in the power sector, of course. And owning one of the most reliable and efficient power plants in North America, one of the few that can blend hydrogen has hundreds of acres of adjacent land in a state that is incredibly business-friendly. I mean that's -- you can't get much better than that. So we are in an active dialogue with a number of folks. You mentioned an interesting point. Yes, the dialogue is, of course, with data center developers, first and foremost, but there are a number of other parties who have an interest in either power or bigger developments at Long Ridge. So I would be surprised if we don't have some development here in the coming months. As I said in my earlier remarks, we're certainly on a pace to have something announceable here. We're comfortable saying prior to the end of 2025.

Our next question is a follow-up from Giuliano Bologna with Compass Point.

I just want to recap kind of go back because there's been a lot of things that happened this year. At the beginning of this year, one of the things you said was that you want to refinance -- you want to complete a refinancing at Long Ridge, along with some other related transactions. You want to go out and finance -- raise the financing for Phase 2 at Repauno. You also want to refinance or recap the holdco balance sheet and also make a large rail acquisition. You've accomplished all of those items this year. And I'm curious, when we look forward, what's next in terms of things that you're looking to achieve or complete this year and next year?

Yes. Well, I appreciate that. We certainly -- it's been a very active first half of the year, and I'm really happy between the first half and then these very recent announcements that we've gotten all that stuff behind us. First and foremost, closing on the acquisition of the Wheeling and making sure the integration between the 2 companies goes smoothly and flawlessly is a priority for us.

Look, I think over time, we're going to continue to be focused on growing the freight rail segment. That is a sector we've loved. We've had a tremendous amount of experience in. And I think there's a lot of value left to create in freight railroads. Our other assets over time will become a smaller percentage of our total assets and cash flow. And as they reach stabilization, I wouldn't be surprised if we seek to monetize some of those assets once stabilized at the valuations we're expecting.

And look, I'd love to monetize some of those other assets and buy more freight railroads. Ultimately, you could see our company predominantly or entirely becoming a publicly-traded freight rail business, just like RailAmerica was and a handful of other companies that were great public companies. So look, no promises, and that's a longer-term plan. But I think more acquisitions in the freight rail space will continue to be a focus for us. And over time, probably some accretive monetizations of our other businesses.

That's extremely helpful. And maybe to jump in with one kind of follow-up on the margin there. I think in the past, you kind of talked about obviously, a lot more activity in the freight rail M&A world and that there's a handful of larger properties. I'm assuming Wheeling being one of those larger properties that you're referring to in the past and then some other small tuck-ins that could be out there for sale or acquirable. In the near term, are you seeing opportunities for smaller high single-digit EBITDA or low double-digit EBITDA assets? Or are you seeing more opportunities for assets that are closer to the size of Wheeling in the market?

Yes. There are -- there is a constant flow of smaller businesses and assets. They tend to not move the needle as much. So I have to admit we will be focused on things that are a little bit more chunky, certainly into the double-digit EBITDA levels. If we find an opportunity that is particularly local or a straightforward tuck-in, sure, we would do that. It probably won't move the needle very much for us. I think we're more focused on the other short line and regional railroads out there, some of the switching lines, the Transtars of the agricultural industry.

Transtar is not the only railroad that was owned by a large industrial company. There are plenty of opportunities out there to allow bigger companies to divest of their in-house rail portfolios. And so we're in a dialogue with some of those owners. It's a huge industry. There are over 500 total short line and regional railroads out there. Many of them have been consolidated. And so there's an opportunity to find chunkier transactions. I'm sure we'll see plenty of opportunities come to the market over the next 6 to 12 months, and I'm excited. I think we can be really competitive in those processes.

That's extremely helpful. And congrats on the execution this year.

Our next question is a follow-up from Brian McKenna with Citizens.

So just on the $1 billion of preferred stock, so a 10% dividend rate, it's not cash paid. So that's $100 million of incremental annual cash flow. Is there a way to think about how much of that cash flow will ultimately flow up to the holdco? And then how much of that do you want to retain for growth CapEx at the rail segment?

Great. I'm glad you asked because -- yes, there's an important element to both the acquisition and the financing. It is a game changer for cash flow at our holding company. While the preferred stock sits at the rail entity, it is noncash pay and it doesn't trap cash. And so that $200 million target of EBITDA, there's some CapEx, of course, at the rail level, but it's not a tremendous number. Cash flow at the rail company can be fully distributed to FIP. We'll have debt service of roughly $100 million, but you can do the math. Net-net, there's significant excess cash flow at FIP. Look, growth capital at the rail business, I mean, at this point, we certainly don't have anything identified. We have the ability to put a small working capital facility at the rail business.

So we'll probably have that in place to fund small opportunities as they come up. I think the growth capital step is something you take as it comes. We have a handful of opportunities and the folks at the Wheeling have a great pipeline of new opportunities. Most of that stuff, frankly, doesn't require a lot of capital. There are really wins that are relatively straightforward and come at very low cost. The additional business coming from Repauno, I mean, there's no additional capital needed for moving those railcars out of the fractionators. And so that's all been historically invested. The track systems are all there. Others are providing the railcars. So honestly, I don't think there's going to be a tremendous amount of capital retained at the rail company, and most of it will be distributed up to FIP for FIP to use for a variety of different purposes after debt service.

Thank you. I'm showing no further questions. This does conclude the program, and you may now disconnect. Everyone, have a great day.