FTAI Infrastructure Inc (FIP) (Q2 2026) Earnings Call Highlights: Record EBITDA and Strategic ...

Negative Points

• Crude volumes at Jefferson were impacted by Middle East volatility, with a temporary reduction in inbound ship volumes during Q2.

• Transtar volumes were slightly lower due to US Steel's blast furnace overhaul at Gary Works, which is expected to be a temporary drag.

• Integration of Wheeling is only about 80% complete, with IT consolidation still ongoing in Q3, meaning full synergies are not yet realized.

• Phase 3 at Repauno is not yet contracted or financed, and the company is not waiting for it before starting the sale process, which may limit near-term value.

• The sale of Long Ridge is still pending, with timing not exact, and the company expects to close by end of Q3, but there is execution risk.

• The company faces uncertainty in the Middle East supply chain, which could continue to affect crude volumes at Jefferson.

• Debt service reduction of ~$25 million annually is significant, but the company still carries substantial debt, and leverage metrics will only improve gradually.

Q & A Highlights

Q: It's been about a year since you made the acquisition of The Wheeling. Can you expand on how you feel now about that acquisition and how progress has evolved since the acquisition? A: (Kenneth Nicholson, CEO) We are thrilled. The acquisition has been a game changer for our rail platform. The Wheeling itself is exceeding our original expectations. We've seen particular activity and strength in propane volumes on The Wheeling. The integration has worked out great with very few issues. While Transtar was a little softer in Q2 due to US Steel's upgrade of their Gary, Indiana blast furnace, by virtue of owning The Wheeling, we posted record results in the aggregate. The impact on diversity and incremental growth opportunities is checking out great.

Q: You'd identified a synergy target on the integration of Wheeling. Did you achieve all of the synergies you were looking for? How far along that process are you? A: (Kenneth Nicholson, CEO) We're about 80% through the integration process, with IT consolidation wrapping up in Q3. We identified $20 million of cost efficiencies and are right on that target, though the full impact will show in Q3 and Q4 results. Where we have done better than expected is on additional revenue opportunities. We are opening additional transload facilities in Pittsburgh stimulated by customers on the Wheeling. We're building sustainable, permanent revenue bases with new customers at Transtar that we didn't necessarily envision when we made the acquisition.

Q: As you're looking for additional properties to put in the portfolio, could you identify what the two or three things you're looking for at the top of that list? A: (Kenneth Nicholson, CEO) Things like diversity of commodities and customers are important, particularly where it helps diversify our existing commodity base. Agricultural and intermodal exposure are things we have less of today. Most importantly, we look for growth. When we look at a new railroad, we try to identify opportunities for growth, not just organically, but with additional capital. We really look for railroads where we think, over a three to five-year period, we can double EBITDA.

Q: At Jefferson, one of the regional partners has had to deal with supply chain constraints due to what's going on in the Middle East. Can you talk about how much rail crude can supplement or offset uncertainty going on with the tanker trade? A: (Kenneth Nicholson, CEO) We handle crude volumes through three modes: inbound ships from the Middle East, trains largely from Utah, and inbound by pipe. We've been informed ship volumes are expected to recover in Q3. We are transitioning actively to inbound rail. The beauty of inbound rail is you get a 2 times multiplier, because inbound rail volumes from Utah require blending. For every 50,000 barrel train we bring in, we also have to bring in 50,000 barrels of pipeline-originated crude for blending. We completed an important infrastructure project with our Southern Star Pipeline about a month ago, which enables efficient handling of light and heavy crudes. We'll see a return of inbound ship volumes and a material increase of inbound rail volumes during Q3 and Q4.

Q: Is the plan to get any Phase 3 capacity under contract? Or could we see a sale of at least a portion of the business before then? A: (Kenneth Nicholson, CEO) Phase 3 is permitted, designed, engineered, and ready to go. We won't finance or start construction until we have a long-term contract in place. The focus right now is on completing Phase 2. We'd love to have Phase 3 contracted and under construction when we look to monetize Repauno, but it's not something we're necessarily planning on. We've already created a lot of value in obtaining the permits and having it fully scoped out. We are the only export-capable facility on the East Coast that actually has room to grow. We're not going to wait for that to start the sale process for Repauno.

Q: Do you feel like now is a good environment for sales on the terminals? Have you had any reverse inquiry? A: (Kenneth Nicholson, CEO) I think it's a good time, and it's going to continue to be a good time for energy terminal M&A. We've definitely received some inbounds, and activity has picked up somewhat with the shifting of supply chains driven by the conflict in the Middle East. Generic inland terminals tend to trade at high single-digit multiples, but strategic export terminals historically have traded at multiples between 12 times to 15 times. That's what we own at Jefferson and Repauno. At Jefferson, we're connected to the two largest refineries in the Western hemisphere. Repauno is really the only available gateway on the East Coast with meaningful room for expansion.

Q: You guys touched on the Nippon investment. Do you have any line of sight as to when construction is going to be done and when rail will start to increase from that facility? A: (Kenneth Nicholson, CEO) Probably at some point over the next six months. Everything's on time, on budget, on plan, probably about a six-month timeframe.

Q: With respect to the third category of potential rail acquisitions, what is it about corporate systems and what is it about that category specifically? A: (Kenneth Nicholson, CEO) The industrial carve-outs are slightly less frequent. There are a number of very large corporate entities in the agricultural space and the metals and mining space that today own their own track systems. Those create unique opportunities for those corporate parents to generate liquidity and focus on their core business. The beauty of those opportunities is that, just like Transtar, most of those businesses have historically been operated solely for their parent owner and have not pursued third-party growth opportunities. We're seeing a pickup in activity and are going to be pretty aggressive on those situations.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .