FTAI Infrastructure Inc.'s Q3 2025: Contradictions Emerge on Synergies, Merger Timelines, and EBITDA Projections

Guidance:

• Q4 results expected to grow as Wheeling and West Virginia gas contributions are fully included.
• Targeting in excess of $450M of annual adjusted EBITDA from events and agreements in place (excludes organic growth/new wins).
• Combined Transtar + Wheeling EBITDA target of at least $220M run rate by end of 2026 (raised from $200M).
• Long Ridge expected to reach a $160M annual EBITDA run rate in Q4; exploring strategic alternatives including a potential sale.
• Plan to refinance parent-level debt with a new bond issuance prior to year-end.

Business Commentary:

• Adjusted EBITDA and Segment Performance:
• FTAI Infrastructure reported an adjusted EBITDA of $70.9 million for Q3, up 55% from the previous quarter and nearly double year-over-year.

• This growth was driven by the acquisition of the Wheeling & Lake Erie Railway and the commencement of gas production in West Virginia at Long Ridge.

• Rail Segment Expansion:

• The Rail segment generated an adjusted EBITDA of $29.1 million, including $8.4 million from the Wheeling, which had a full-quarter EBITDA of approximately $20 million.

• The integration of the Wheeling and the potential for new business opportunities are expected to propel the segment's growth.

• Long Ridge Gas Production:

• Long Ridge achieved an EBITDA of $35.7 million in Q3, driven by the commencement of gas production in West Virginia, surpassing 100,000 MMBtu per day.

• The production is well above the power plant's consumption, enhancing revenues and profitability.

• Upcoming Priorities and Strategic Moves:

• FTAI Infrastructure plans to take active control of the Wheeling immediately upon STB approval, pursue strategic alternatives for Long Ridge, and refinance existing debt.
• These strategic actions are aimed at maximizing shareholder value, leveraging strong asset performance, and ensuring financial stability.

Sentiment Analysis:

Overall Tone: Positive

• Management: "Adjusted EBITDA for the quarter was $70.9 million, up 55% from $45.9 million last quarter and nearly double year-over-year." CEO: "Events of the third quarter ... put us in a position to generate in excess of $450 million of adjusted EBITDA on an annual basis." Long Ridge: "we anticipate Long Ridge to achieve its $160 million annual EBITDA run rate in this fourth quarter."

Q&A:

• Question from Giuliano Anderes-Bologna (Compass Point Research & Trading, LLC): 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?
  Response: No; G&A is largely fixed and should remain relatively flat year-over-year, with only a modest seasonal Q4 uptick.

• Question from Giuliano Anderes-Bologna (Compass Point Research & Trading, LLC): 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?
  Response: Core synergy is a targeted $20M of annual cost savings (combined purchasing, elimination of redundancies) plus additional revenue upside from network optimization and expanded market access; these upside items are incremental to the $220M railroad target.

• Question from Giuliano Anderes-Bologna (Compass Point Research & Trading, LLC): 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?
  Response: Bigger platform is more accretive; similar cost synergies expected for tuck-ins, while revenue enhancements depend on whether the acquired railroad connects to the network.

• Question from Brian Mckenna (Citizens JMP Securities, LLC): 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?
  Response: Still reasonable to expect approval soon after the government reopens; STB had targeted end of November pre-shutdown, and management believes the matter is a priority.

• Question from Brian Mckenna (Citizens JMP Securities, LLC): 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?
  Response: Combined rail EBITDA was ~ $40M in Q3, with normalized cash flow after capex of roughly $32–35M; excess cash will flow to the parent for debt service and, absent highly accretive investments, be used to deleverage.

• Question from Brian Mckenna (Citizens JMP Securities, LLC): 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?
  Response: Plan to complete a parent-level bond refinancing by year-end without needing an asset sale; expect a senior notes structure broadly similar to prior ~5-year bond with shorter call protection; pricing/details to be set during marketing.

• Question from Gregory Lewis (BTIG, LLC): 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?
  Response: Phase 3 doubles capacity vs Phase 2 (two 640k-barrel caverns); approx. $200M capex per cavern; expected to generate ~$70–80M annual EBITDA and take ~2–3 years to build.

• Question from Gregory Lewis (BTIG, LLC): 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?
  Response: Management expects to market Long Ridge as an integrated asset (plant, gas, land); buyer interest to date favors the whole site, though splitting assets is possible but currently less likely—objective is to maximize value.

Contradiction Point 1

Synergies and Diversification

It involves changes in the expected synergies and diversification benefits from acquisitions, which are crucial for strategic planning and investment decisions.

Can you provide examples of the synergies from combining Wheeling and Transtar? - Giuliano Anderes-Bologna (Compass Point Research & Trading, LLC, Research Division)

2025Q3: There's a long list of discrete items for cost savings and efficiencies, such as combined purchasing power and eliminating redundancies. Additionally, there are opportunities for network optimization and expansion, like keeping volumes on the Wheeling system for longer periods, increasing revenue. The expanded reach provides access to new markets for customers, potentially attracting more business. - Kenneth Nicholson(CEO)

Can you discuss the synergies between Transtar and Wheeling? - Giuliano Jude Anderes Bologna (Compass Point Research & Trading, LLC, Research Division)

2025Q2: The acquisition of Wheeling & Lake Erie Railway is expected to provide significant synergies. Immediate efficiencies include quicker transit times and optimized use of assets. Diversification adds over 250 customers and different commodities, making the combined company more attractive for potential buyers. - Kenneth Nicholson(CEO)

Contradiction Point 2

Regulatory Efficiency and Acquisition Strategy

It involves changes in the perceived efficiency of regulatory processes and the company's acquisition strategy, which are critical for strategic planning and execution.

If you pursue more acquisitions in the future, what synergies can you realize through a larger platform and adding tuck-in acquisitions even if they are not adjacent to the current system? - Giuliano Anderes-Bologna (Compass Point Research & Trading, LLC, Research Division)

2025Q3: Bigger is better. The same types of cost eliminations would be there, and we'd be even better positioned to go out and buy more railroads. The same types of synergies would apply, except for some revenue enhancements if acquisitions aren't connected physically. - Kenneth Nicholson(CEO)

Has anything changed over the past year that's causing the increase in consolidation in the rail industry? - Gregory Robert Lewis (BTIG, LLC, Research Division)

2025Q2: There has been a pickup in consolidation driven by a friendly business environment. Regulatory processes are becoming more efficient. Our scale and financial position improve our competitive stance in potential acquisitions. - Kenneth Nicholson(CEO)

Contradiction Point 3

Regulatory Timeline for Transtar and Wheeling Merger

It involves differing timelines for regulatory approval, which could impact strategic planning and investor expectations.

Is there an updated timeline for STB approval of the Rail segment due to the government shutdown? - Brian McKenna(Citizens JMP Securities)

2025Q3: We hope it's still achievable by year-end. - Kenneth Nicholson(CEO)

When do you expect the STB filing to be completed? After the STB filing, do you expect the transaction to be approved, and if so, how long would the approval process take? - Angela Hsu (J.P. Morgan)

2025Q1: We expect our STB filing to be completed within the next week or 2 and certainly before the end of the first quarter. - Kenneth Nicholson(CEO)

Contradiction Point 4

EBITDA Impact of Transtar Integration

It involves differing projections for the financial impact of integrating Transtar and Wheeling, which are key strategic initiatives.

Can you provide examples of synergies from combining Wheeling and Transtar? - Giuliano Anderes-Bologna(Compass Point Research & Trading)

2025Q3: We expect the integration of Transtar and Wheeling to deliver approximately $30 million of annual run-rate synergies. - Kenneth Nicholson(CEO)

Can you clarify the EBITDA impact from Transtar, Long Ridge and Repauno, as well as their EPS impact for the company? How should we assess the earnings power in 2025 given these projects are in the acquisition process? - Angela Hsu (J.P. Morgan)

2025Q1: And Transtar, we expect will deliver an additional $10 million in annual run-rate adjusted EBITDA. - Kenneth Nicholson(CEO)

Contradiction Point 5

Long Ridge EBITDA Impact

It involves the expected financial impact of the Long Ridge transaction, which is critical for forecasting financial performance.

What cash did the Rail segment generate this quarter, and what is the top use for this excess cash? - Brian Mckenna(Citizens JMP Securities, LLC, Research Division)

2025Q3: Long Ridge reported a combined EBITDA of about $40 million. Normalized cash flow could be about $35 million. All of that cash will be available to the parent level for debt service initially. Excess cash after debt service will potentially be used to deleverage, depending on investment opportunities. - Kenneth Nicholson(CEO)

When will the $160 million EBITDA from Long Ridge be reflected in consolidated results? - Brian Mckenna(Citizens)

2024Q4: The full impact of the Long Ridge transactions will be reflected in Q2, with the first month's impact in Q1. The $30 million capacity revenue will start contributing in Q2. EBITDA is expected to be fully at $160 million by Q3, with potential for higher levels depending on gas prices. - Kenneth Nicholson(CEO)