雅虎香港財經 FTAI Infrastructure Inc. (NASDAQ:FIP) Q4 2023 Earnings Call Transcript
FTAI Infrastructure Inc. (NASDAQ:FIP) Q4 2023 Earnings Call Transcript March 1, 2024
FTAI Infrastructure Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day and welcome to the Q4 2023 FTAI Infrastructure Earnings Conference Call. At this time all participants are in listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. As a reminder, this call is being recorded. I would now like to turn the call over to Alan Andreini, Investor Relations. You may begin.
Alan Andreini: Thank you, Michelle. I would like to welcome you all to the FTAI Infrastructure fourth quarter and full year 2023 earnings call. Joining me here today are Ken Nicholson, the CEO of FTAI Infrastructure; and Scott Christopher, the company's CFO. We have posted an investor presentation and our press release on our website, which we encourage you to download if you have not already done so. Also, please note that 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.
Ken Nicholson: Thank you, Alan, and good morning, everyone. This morning, we'll be discussing our financial results for the fourth quarter and full-year of 2023. And in doing so, I'll be referring to the earnings supplement, which we recently posted to our website. Before getting into the financials, I'm pleased to report that our Board has authorized a $0.03 per share quarterly dividend to be paid on April 5 to the holders of record on March 27. Now on to the results. Fourth quarter adjusted EBITDA prior to corporate expenses came in at $42.4 million, up 32% quarter-over-quarter and representing a new record for the company. For the year, adjusted EBITDA was $140.9 million, also a record and up 60% from fiscal 2022. Our strong performance for the quarter was driven by record results at our two largest companies, Transtar and Jefferson, and the realization of several of the initiatives that we set up to accomplish throughout the 2023 year.
But we're equally excited about the prospects for our two other businesses, Repauno and Long Ridge, which continue to make significant progress on new opportunities that contribute materially to EBITDA that can contribute materially to EBITDA in the year ahead. With the strong results at Transtar and Jefferson, as well as the momentum at Repauno and Long Ridge, we are now forecasting to exceed our previous target of $200 million of run rate EBITDA during 2024. In terms of the highlights of each segment, Transtar reported $23.6 million of adjusted EBITDA, its highest quarterly results since we acquired the business in 2021. Operationally, Transtar had an excellent quarter with growth in both carload volumes and pricing, while operating costs remained steady.
EBITDA margins exceeded 50% in Q4, a first-time accomplishment for the company. Recently implemented pricing increases and several new business activities, including our new railcar repair facility have already begun to contribute in 2024, so we expect momentum to continue at Transtar in the year to come. At Jefferson, EBITDA was $14.3 million for the quarter, also a new record. Volumes continue to grow at Jefferson, and we're advancing more new business opportunities than ever. We'll talk in more detail shortly, but today, we are in advanced negotiations with a number of new and current customers for incremental business representing a total of $75 million of annual EBITDA once commenced. At Repauno, the adjusted EBITDA loss continued to narrow, and we made significant progress on our Phase 2 expansion project that will transform our business and long-term EBITDA generation.
And finally, at Long Ridge, results reflect the previously scheduled maintenance outage during the quarter, as well as reduced third-party gas sales given the lower price environment for natural gas. Had it not been for the outage, our results would have been in line with our third quarter. I'm as optimistic as ever about our business at Long Ridge, and I believe the macro outlook for modern, efficient power plants is as strong as it's been since we first commissioned the plant a couple of years ago. Briefly on the balance sheet. In the aggregate, we had $1.34 billion of debt at December 31, $560 million of debt was at the corporate level, while the rest of our debt was at our business units. Transtar is completely debt free, while approximately $750 million of debt was at our Jefferson segment and $50 million was at Repauno.
At both of these entities, debt is non-recourse to the parent, carries low coupons and long duration and is not callable in the event of a sale of the business. With continued growth in our earnings and favorable capital markets, we're expecting to be in a position to refinance our corporate balance sheet during the 2024 year, which will allow us to reduce fixed charges and increase distributable cash flow. I'll talk through the detailed results at each of our segments and then plan to turn it over to questions. Starting with Transtar on slide seven of the supplement. Transtar posted revenue of $44 million and adjusted EBITDA of $23.6 million in Q4, up from revenue of $41.9 million and adjusted EBITDA of $17.4 million in Q3. Both carload volumes and average rate per car load grew in the quarter while operating expenses were steady.
Fuel expenses were more than offset by fuel surcharge revenue during the quarter as we recovered some of our higher fuel costs incurred in Q3 with fuel surcharge revenue received in Q4. We're making great progress on multiple initiatives at Transtar to drive incremental revenue and diversify our customer base. The table on the right side of slide seven of the supplement shows the incremental EBITDA we expect from this year for each initiative. In total, we expect these programs to represent approximately $4 million to $6 million of quarterly EBITDA and $20 million on an annualized basis. Now on to Jefferson. Jefferson generated $19.3 million of revenue and $14.3 million of adjusted EBITDA in Q4, compared to $16.6 million of revenue and $7.8 million of EBITDA in Q3.
Volumes handled at the terminal grew significantly to an average of 185,000 barrels per day, driven primarily by increased refined products, while crude oil volumes remained steady. Operating expenses were also lower for the quarter as our recent cost savings initiatives started to kick in. In the aggregate, we're expecting $8 million of annual cost savings to be fully implemented by the middle of this year. Also during the quarter, we executed a new lease at our Jefferson South terminal. On our income statement, we recorded a gain in connection with this new lease. To elaborate a bit on this, we do not expect this type of event to be a one-time item. We have a low basis in land at Jefferson South given the attractive purchase price we negotiated in purchasing the site.
When we execute new leases substantially above the book value of the land at Jefferson South, we record a financial gain. At current market lease rates, we expect to continue to record gains like this as we lease up the remaining acreage at the site. We have approximately 200 acres available for lease. So while these gains may not repeat every quarter, we certainly expect to record similar or larger gains in the future. But more importantly, the new business environment at Jefferson remains robust, and we're advancing more opportunities for both conventional energy products as well as clean, hydrogen-based fuels. Last year, we secured a new 15-year contract for the transloading and export of ammonia commencing in 2025. We currently have three additional projects in advanced negotiations, together with last year's ammonia contract represent approximately $75 million of annual EBITDA once operational and have the potential to be transformational for Jefferson.
If we're successful in converting these opportunities to business wins, we will far exceed our prior target of $80 million of annual EBITDA. Now on to Repauno. We continue to narrow our operating loss and our Phase 1 multiyear contract to transload natural gas liquids is continuing smoothly. As a reminder, that contract with an investment-grade counterparty has minimum volume commitments and does not expose Repauno to commodity prices. Our negotiations continue in connection with the much larger Phase 2 transloading system, although we are now in discussions with additional producer customers, which should lead to higher committed volumes. Phase 2 can ultimately quadruple the capacity of natural gas liquids handled at the terminal. So while negotiations have been slower than hoped, the scale of the ultimate commercial opportunity is larger.
I'm confident we'll sign up our first customer for Phase 2 in the next 30 to 60 days and start construction immediately thereafter. In the aggregate, we expect Phase 2 to cost approximately $200 million to build, funded entirely with tax exempt debt and to generate approximately $40 million of annual EBITDA once completed. Closing out with Long Ridge. Long Ridge generated $5.1 million in EBITDA in Q4 versus $8 million in Q3. Power plant operations were impacted by a 20-day planned maintenance outage, while gas production continued to be managed down during the quarter and the currently lower gas price environment. At gas prices of under $1.50 per MMBtu, our profit on third-party sales is less meaningful, so we limit production and opt to keep excess gas in the ground.
This month, we expect to close a new financing for our recently acquired gas resources in West Virginia. The new facility is long-term with an extremely attractive rate, so that positions us well to start gas production when prices recover. More importantly, we have been actively advancing a handful of significant opportunities with on-site power customers at Long Ridge, which could have a significant positive impact on EBITDA. Late last year, we entered into a letter of intent with a data center operator for the lease of a portion of our property and utilization of a substantial portion of our power capacity. The LOI is the first step to what we expect to be a binding long-term agreement and includes non-refundable deposits, a portion of which will hit the P&L in this first quarter.
On a macro level, data center demand in the PJM region alone is expected to grow from 3 gigawatts of power needs currently to nearly 17 gigawatts over the next six years. New renewable resources will not be sufficient to meet this demand, and owners of modern efficient gas plants like Long Ridge have the potential to benefit greatly in the coming years. With that in mind, we've also been advancing negotiations with an existing tenant that will require up to 200 megawatts of our power capacity. We expect to be in a position to execute this LOI in the month of March. To wrap up, we're pleased with our direction as we enter the year ahead and excited about the things to come. Now let me turn the call back over to Alan.
Alan Andreini: Thank you, Ken. Michelle, you may now open the call to Q&A.
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