Thank you. About two years ago, actually, almost exactly two years ago today, we spun out FTAI Infrastructure out of FTAI. FTAI was originally called Fortress Transportation and Infrastructure. It was a combination of Ares, you know, aviation leasing, engine leasing, and aerospace, and this infrastructure business. Two businesses that we know extremely well, but they were together, and it was a K-1, which everybody hates, and which meant you couldn't go into investable indexes. It meant that 40% of the market wouldn't look at you because of the K-1s and because of the fact that it wasn't a pure play.
You had the infrastructure guys who knew that, understood infrastructure, the gifts that keep on giving forever, and you had the aerospace guys who said, "I don't know infrastructure, I know aerospace," and you had the aerospace guys say, "I know aerospace, I don't know infrastructure. I'm not spending the time to learn another thing," which, you know, it made perfect sense. We knew all along the game plan was always to eventually split the companies. Once they had the balance sheets, they could do that, had the revenues and EBITDA, they could do that, and the question was when to do it. We felt that the right time to do it, again, was two years ago. At that time, when we did the split of the two companies, the companies were trading at...
The entity was at $17 a share. Those two entities are trading this morning at $132. So it would be safe to say that the strategy worked. It worked pretty well. Now, the question now is, you know, FTAI, FTAI is off on its own. FIP, which is the infrastructure business, is basically, you know, I would say it is where FTAI was maybe four years ago. So what has happened, we did the spin, this entity that sold, I think, at $2.67, is now trading with a nine handle. So it's working, and people are starting to recognize what this, what this asset can do. It is infrastructure. No, this is. So to spend time you reading the disclaimer, which we all love to read.
This is what Q1 did and what Q2 did, Q2 did. You can see the, you know, the steady growth in EBITDA. We're expecting to be at $50 million in EBITDA in the segments before by the fourth quarter of this year, and we feel pretty comfortable about that. Let me take you to what I think are the interesting pages in here. Again, this is just the four main assets and what they did in Q2. These are the... Let's look at the segments. Let me tell you a little bit of the story here. How much time do we have? I don't have the...
I just wanna see what's left, about how quickly we want to go. Oh, there it is. Okay, cool. Great, so we've got some time. Let me tell you the story of this. Transtar. We bought Transtar, which is the short line, the six of the short line railroads, that U.S. Steel owns. They wanted to pay down some debt. It was almost a one-year period. The only people that move slower than the rail industry are the steel industry. So it took a year. And one of the reasons why we were able to buy it at around 8x of EBITDA was because U.S. Steel did something that was actually pretty smart. They didn't want any of the financial buyers in there.
So, you know, the Apollos, the Blackstones, the Stonepeak, none of those guys were permitted in the data room. They, to be in the data room, you had to be an operator. So it was us, it was Watco, it was Genesee & Wyoming, and towards the end of it, it was us and Genesee & Wyoming. So we were able to get it at a great price, around $640 million. Since then, the industry's gone crazy. I mean, we could sell half of that tonight for reasons that are unclear to me. People are completely fallen in love with freight, freight railroads, okay? We could sell half of it tonight without retaining an investment banker, without doing a beauty contest. We could sell half of it tonight for somewhere between $500 million and $550 million.
Not bad for something that you paid $640 million for two years ago. We don't want to do that. We don't want to do that for this reason: short line railroads have been... If you go back 25 years, and you look at Fortress's history with short line railroads, it is impeccable, okay? We purchased the Central Maine and Quebec Railroad out of bankruptcy for $14.5 million, put $20 million into it, and three years later, we sold it to the Canadian Pacific for $140 million. Same deal with Florida East Coast Industries, and Joe Adams and Ken Nicholson were the guys that built RailAmerica, which we sold to, actually sold to Genesee & Wyoming. So we know the short line industry. We know the short line industry really well.
If you said to me, "What is this entity going to look like two years from now?" There's a good possibility that one or two of the assets that we're gonna talk about in a minute are gonna be gone. They will have been sold, and we will continue to build out with tuck-in acquisitions into Transtar, and Transtar will be three times the size that it is today. It is a great railroad. The six railroads are great railroads. The guys that operate it are terrific guys. When we bought it, it was around 95% U.S. Steel business, which is obviously a negative. You got tremendous concentration. Right now, we're kind of rooting for the Nippon Steel deal to go through because it would be an upgrade in the credit, plus we're doing more third-party business there.
So the third-party business is now around, not 5%; it's more like 15% of the business at U.S. Steel, and that number keeps going down. Obviously, the more third-party business, the less you have to worry about, you know, about concentration. So it is a great asset. It is Steady Eddy. They are a great source of and there's no debt on that asset at all. So it's a great company, and it's growing nicely, just as expected.
You know, it was interesting we cut these guys loose because when they were running the U.S. Steel business, they had all sorts of inquiries from third parties saying, "We want to store cars there," or, "We want to put towers on your right of way," or, "We want to do transloading." They were not permitted to do any of that, none of it, because U.S. Steel said, "Your job is to bring in the coal, the coke, the iron ore, and to take out the steel, nothing else. We don't want you making money doing anything else," because that operation was so critical to the operation of those plants, especially at Gary and in Pittsburgh.
So they now have the, you know, free will to go out and do third-party business, and they're doing a great job of that. Jefferson Terminal. This was a terminal that was originally conceived and put in place to do crude by rail from Canada. Back when we bought it in, I think it was 2016, when we bought it, crude by rail from Canada was hot and big, and now that business just disappeared. The arb went away when, I think it was a woman who was the Prime Minister of Saskatchewan, changed some of the rules there and what they could lift and what they couldn't lift, and that trade went away.
So we had to recreate ourselves doing crude, especially from the Uinta Basin near Salt Lake, and refined products down to Mexico and all over the world. So that thing has certainly been delayed in its growth, but now it's finally happened, and we're starting to see growth every single quarter. And our two biggest customers now are Exxon and Saudi Aramco, which puts us in a wonderful position because we've now got long-term contracts with these impeccable credits, and those impeccable credits makes it possible for you to do, you know, pretty crazy financing. I mean, most of the financing down at Jefferson, which is non-recourse financing, and it was all municipal financing, is done. I think the average rate is just under 3%.
As I said, one of the nice things about that financing, that financing travels with the asset. If someone were to come in and want to buy that, that financing doesn't have to be paid off. It goes with it. It's debt, but we almost look at it as an asset. We've talked about some interesting deals that we're working on down there. One of them is a reversal of the Southern Star Pipeline. We built a pipeline from our facility down to Port Arthur to the Motiva plant. The Motiva facility is now the second-largest refinery in the United States, and across the river from us, now that their expansion is over, I mean, it is literally a three-wood away from us, is the Exxon facility, which is the largest refinery in the United States.
So our two biggest customers are the two best - two of the best credits in the world, and they're, you know, the number one and number two refinery. So what is becoming, not too surprising, is the Jefferson Terminal is becoming more and more a part of the permanent infrastructure of these two massive companies. Now, you know, which begs the question, as you become more and more a part of their infrastructure, what do they do with you? Do they acquire you? Do they become investors in you? Do they become investors with the ability to turn their investment into a great investment by virtue of their own business there? You would have to assume that conversations are ongoing in that area right now. Repauno. Interesting asset.
If you ask Joe Adams or Ken, what asset do they think of the four has the biggest upside, it may be Repauno, which is the one that is currently just basically break even. Here's why, and every now and then in business, dumb luck is an important factor. You have bad luck. You have good luck. When we bought it, we knew. And this was. We bought this from DuPont for $25 million. We knew that there was a cavern, a small cavern. I think it was about 180,000-bbl cavern. The DuPont, they invented dynamite here. They had used it to store ammonia, and we didn't want the cavern.
In fact, they gave us $1 million to take the cavern, and we took it, and because we didn't want any of the liability associated with the cavern. We took the cavern. They paid us to take it, and we did a little bit more engineering. We had Lane Engineering come in as we said, "Caverns, that's interesting," 'cause we'd found out that more and more people were using caverns for natural gas liquid storage. So they said, "You are sitting on one of the largest, purest granite formations in the world." Why do we care? Here's the math: If you build 1 million barrels of storage, above-ground storage for natural gas liquids, it costs you between $350 million and $400 million per 1 million barrels of storage.
The reason it's so expensive is because those tanks have got to be insulated, and they have to be pressurized. If, on the other hand, you're sitting on this pure granite formation, you go down 800 ft and you build the caverns, you build the storage down there, you can build it for one third to one half the price. And in both cases, the million barrels of storage generates $50 million-$60 million in EBITDA. Pretty interesting situation. Knowing that, we worked with the New Jersey DEP. They had never done caverns. Caverns were done in Pennsylvania, caverns were done in New York. So we spent about 18 months with the New Jersey DEP developing the regs for them to do it to approve these. Those regs were issued, I think it was last June. We immediately filed our application.
Needless to say, we'd helped them for 18 months writing it, so the application, our 400-page application, was submitted a week after the regs came down, and we're expecting approval sometime, you know, before the end of this year per the New Jersey DEP. Now, why is that important? The folks across the river, okay, at Marcus Hook, which is the end of the Mariner East Pipeline, are the biggest exporters of, of, natural gas liquids on the East Coast. We are also permitted to ship out natural gas liquids. Now, that's important. I think there are only four sites on the East Coast that are permitted for that. It's not like getting permits in Texas. You can get permitted in Texas in 20 minutes to do anything.
In New Jersey and in New York, Connecticut, getting a permit to do anything is, you know, a multi-year project, okay? We've got-- We're permitted to do that. We are months away from having the caverns approved, which means we could start the two- to three-year project of building these underground caverns and securing the contracts. Now, the guys across the river at Marcus Hook, they know the math on caverns because they have caverns. They don't have the latest technology for those caverns. We would be putting in the latest technology, which means you could draw the stuff from down below faster and cheaper. But they understand the math.
There have been people who have speculated that Energy Transfer would come to us because they've coveted this site now that they've seen what we're doing with it, that they would come to us and say, "Look, we're gonna make you the proverbial..." You know, the godfather walks in, and he's gonna make you the offer you can't refuse. "Don't take the two to half-- two- to three-year building risk, putting contracts together. We know this business. We know caverns. Here's an offer you can't refuse. You can declare victory and move on." Is that a possibility? It's a very real possibility. Now, you know, depending upon your, depending upon your view of the world and how long you want to wait and how long you want to take, you want to build something out, you might say, "Don't do it." Get the...
You know, do the math where you have 6 million bbl of underground storage in three years, and you're making $50 million-$60 million in EBITDA per million barrels of storage. That is a company all by itself. That is a big company all by itself. So we're playing with these things. What we know for sure is, is that we know short line railroads better than maybe anybody on the planet, except for maybe Genesee & Wyoming. And we know how to build them. We know how to grow the EBITDA. We know how to take the third-party EBITDA in that business and grow it, and that's something that we're looking at, we're looking at very carefully. And now the one that is kind of, it's kind of on everybody's radar right now for a very simple reason.
Long Ridge is a plant that is up and running, 485 MW, okay? One of the things, if you've ever heard the term AI, which I'm guessing everybody has, okay, one of the things that's going on in the world today is that, you know, whether it's AWS or Google or Microsoft, pick your favorite of the big, you know, the Big Seven, they want power. They want power for AI. You know, so you got to build the data center, you got to do the fiber, you got to do the whole thing. The gating point is energy. That's the thing that is stopping everybody. Some of you may know this Talen deal that was done recently.
They did a deal with AWS, and it was done at-- Right now, most, you know, in the PJM, I think the PJM is averaging around $30-$32 a megawatt, okay? The Talen deal was done at $90 a megawatt, okay? That's how desperate these guys are for power to drive the data centers. So where this could go for us is interesting.... Very interesting. I mean, right now, in terms of guys that want to get their hands on the 485 MW of power that we have, I mean, it's like we're running a deli. You know, get a number and wait in line for your roast beef sandwich. It's kinda like that.
Now, one of the issues that you deal with, though, is that in every single power plant, when you have one power plant, as opposed to a portfolio of power plants, is that you know with 100% certainty you're gonna go down twice, maybe three times a year for scheduled maintenance, and you always can have the unscheduled maintenance. How do you back it up? One of the things you do is you have a study done by the PJM, and you say, "Okay, we may have to call on you during a regular scheduled maintenance or during an outage, unscheduled outage, and we have to draw 500 MW of power from you." Those studies take time. Those studies are going longer and longer, and you gotta wait longer and longer.
One of the things that we could do is we could say, "All right, we're gonna build another power plant right next to the one that we have," and you'll still have, quote, behind-the-fence pricing, no transmission cost. We'll sell that power into the PJM as a merchant plant, until which point in time, you know, there's an outage or a scheduled or unscheduled outage, we can back up through our own, you know, through our own system. One of the other solutions that's being proposed, which we're looking at also, is this idea of the generators, these $25 million big gas or diesel generators that you put, and you get a whole string of them.
And to do, you know, 100% coverage for some amount of power, you put in 110% or 115% or 120% of these things. So if one of these units goes down, the other one automatically kicks in. So it's very complicated. It takes time, but the numbers are goofy. The numbers are goofy in terms of what these guys are willing to pay for guaranteed power. So we're right in the middle of that right now. So it is kind of interesting. When you look at this portfolio of four assets, you see a lot of optionality. You see something that would be kinda generic growth, steady, you know, easy, steady growth, and these things will continue to grow, much like FTAI did on the aviation side.
But you also see assets that have the potential, not so much Transtar. Transtar will be a buyer, but you see, you see three assets that very easily could be bought at big numbers, which would give us the flexibility to get rid of the Ares preferred, recap the balance sheet, and then you've got a real company that's doing $200 million-$300 million worth of EBITDA. And if it trades, you know, where most infrastructure trades around 11x-12x, then you've got something. You've got an asset that's worth a lot more than even the current value. And again, the spin was done at $260 million. It's now with a nine handle, but I think the potential is there for this to, you know, this to go much higher.
What I would tell you, though, is if it's an investment that would make sense for you, you shouldn't... Depending upon the nature of your money or the tenor of your money, you know, it's not an asset that you know, it's not, "How many Spotify customers did you get this quarter?" Okay, this is an asset where you say, "I want to invest in it, and I'm gonna watch it for 18 months, 36 months, and I'm gonna watch these things develop. I'll buy it here with a nine handle, and I'll sell it with a two in front of it," or something like that. But don't buy it if your money is transient, if your money is... You know, you gotta show something every quarter, or you gotta show it every month. Buy it if you have a, you know, 18 month- to 36-month holding period, is what I would say. I will open it up for questions. Yes, sir?
What's the capacity of Repauno's cavern?
We can put in. The one we have right now is about 180,000 bbl, but the sixth that we could put in per Lane Engineering is around 6 million bbl. Now, the way it works, as I said, about 1 million bbl of storage generates $50 million-$60 million in EBITDA, and it's about a third to half. The most expensive one is the first one because you gotta build this huge shaft that goes down. Then that shaft is used to build 2 million, 3 million, 4 million, 5 million, 6 million. So the first one is your most expensive. The first one probably costs you $180 million to build, and the last one probably costs you around $80 million to build. So they end up around $110, $115, versus the $350-$400 that you would pay if you were, if you did above-ground storage. Yes, sir?
Was the liability that DuPont was worried about, like $80 million?
Yeah, it was interesting. There was a lot of remediation. There was a lot of stuff that was in the ground there, from the dynamite that was done. By the way, Mr. du Pont managed to blow himself up there and was killed at the facility. He, you know, I don't know if that was viewed as a success or a failure, but he died in the process. But they invented dynamite there. But there was a lot of remediation that had to get done. It took us almost a year to negotiate the environmentals with DuPont. It's all done. Yeah. Yeah, it was done.
On your car production, have you looked at the microreactors?
Yeah, we have.
Dabble.
Yeah, we have, and we are looking at that. Yeah, that's kind of an interesting play. And obviously, you know, when people are talking about reopening nuclear reactors that were in, you know, shutdown mode, it's telling you nuclear is back.
Didn't the Dow or Japan actually still go ahead with the chemical plant?
I don't know. They may have.
I think they-
Is that right? Yeah. Yeah, it's interesting. Power is scarce right now, and the numbers are just goofy. I mean, I just saw something a couple of days ago in the Journal about this, and the numbers of the demand for power that's coming. And it was, you know, it's interesting. We were with the AWS guys the other day, and I mean, this was hilarious. You'll get a kick out of this. They said, "If you think this is big in terms of the power and data." They said, "The next two things that are coming, we think are gonna be even bigger." So naturally, you're on the edge of your seat because AWS is supposed to know about power and, you know, the need for data. We said: "What do you think?
What are they gonna be?" They said, "The number one thing is gonna be driverless cars." I said, "Okay, that makes sense." If any of you have been in San Francisco recently, these white cars with all these crazy things spinning around them, you know, are there, and they're working, okay? He said it's gonna be interesting. There's a, you know, I was with Westchester. We were with one of our big investors, and he was telling me that the AWS guys were saying there will be a time when people talk about traffic accidents and the transition from driverless cars to people that are driving their own cars.
The traffic accidents are gonna go down. They're gonna keep going down because they're gonna figure out you know how to make those cars even better and safer. So I said, "Okay, that's great. Makes a lot of sense." And I said, "What's the number two thing that they think is coming?" This had my full and undivided attention.
They said, "Robots." I said, "That kinda makes sense." I said, "What kind of robots?" They said, "Ah, you asked the perfect question." They said, "Sex toy robots," and they were talking about the fact that 45% of all the stuff that's going on in the internet now has got some pornographic angle to it, and that the sex robots are gonna be the next big thing for taking power, you know, in the industry, and they want to be prepared for it, and I said to myself, "I don't know that I would wanna be, you know, dealing with a prototype in that area." I mean, that could end poorly. I could see a lot of ways that could end poorly, but it was interesting.
You know, what they were talking about is that the world is just changing. They were talking about... You know, it's really funny. My son put on a, you know, Google has what, I don't know what percentage of all the search in the world right now. It's, it's, it's a massive number, okay? And my son put something on my phone. It's an AI app called Perplexity. I don't know if you've heard of this. I don't use Google anymore. I use this thing called Perplexity, and you ask it a question, you know, on, you know, "Tell me this," blah, blah, blah, blah. You not only get the answer at warp speed, but you get five other things that relate to it, that it answers for you, that you'll probably wanna ask as a follow-up question.
I mean, it is pretty amazing in terms of, you know, where we're going. But you look at all these different things, you know, in terms of AI and driverless cars or, you know, robots or whatever, okay? You see power. Everybody needs power, and we're lacking power. You're gonna see a comeback in, you know, the nuclear power plants. You're gonna see these mini nuclear things. There's a lot going on right now, and you know, the old story is, you know, as investors, you wanna be kinda not where the puck is, but as, who was the great,
Gretzky.
Gretzky, yeah. You wanna skate to where the puck is going, and, I think that's maybe where we are. Yes, sir.
What's your current feedstock at Long Ridge, and are you using any hydrogen yet?
Yeah, it's gas. We're using about 15% hydrogen, and you know, look, it's still expensive. It doesn't make sense from a math standpoint, but you know, the tree huggers in California, what they want is to say, you know, we're reducing our carbon footprint, and the 15% that you see at that plant is the 15%. That's our 15%. I mean, total BS, but that's what they say.
Is that how much you can use?
We can go up to 50%.
50%
But right now, you know, when the regs came out and everybody thought that hydrogen was gonna get these huge subsidies, well, they said they were gonna do the big subsidies, and then the regs came out from the Biden administration, and math wasn't so good. So right now, hydrogen, sans the subsidies, doesn't make sense.
In terms of what the stock has done recently, which is great, is it really about Long Ridge? Is that what's been the catalyst for-
You know, I don't know. It could be. It could be. It also could be about the people know that we're close on these cavern permits. It could be the fact that people think that Motiva, you know, Saudi Aramco, and Exxon are sniffing around. Because at some point in time, if you're one of those behemoths, you're saying: "Wow, we're using these guys for the, you know, all the refined products to Mexico. We're now using them as our major international export facility. We're now, you know, shipping, you know, stuff off the Market link up to them to blend with the crude that's coming in from the Uinta Basin." You know, it's interesting. I mean, you know, and what turns these guys on at the time changes all the time.
Everybody wanted crude by rail from Canada. That thing got shut off, and production increased in the Uinta Basin near Salt Lake. So you're saying, "Big deal. What's that mean?" Well, as it turns out, that crude coming from the Uinta Basin is this very, very waxy crude. So what does that mean? For reasons, again, unclear to me, 'cause I'm not a physicist, that crude that's coming from them is a very, very heavy crude and is great for making lubes. And the... You know, all these guys care about is the netback. What is the, you know, what is the netback to me for these things? And as it turns out, that is one of the best crudes in the world for making lubes, and it's great for us because there are no pipelines.
And the API on that thing is so low that even if you did have pipelines, you'd have to put so much condensate in it that it would destroy the math. First of all, there are no pipelines, and it's gotta come by rail. And when it comes by rail to us, we're the only facility in Beaumont, right next to Exxon and Saudi Aramco, who can handle it. Because when it comes in, it comes in, and it's not. You don't pour this out. You gotta scoop it out. It is so thick. I mean, it's almost like, like, you know, putty. You have to heat it. You have to then put it into heated tanks. You then bring in two local barrels of light crude.
You blend it, then you send it back to Saudi Aramco or to Exxon, and they do the whole process. Now, why those barrels are great for us, and, you know, every barrel was not created equal, is that we may get a barrel of diesel coming across the river from Exxon that goes... Kansas City Southern takes it to Mexico, which is great. That's fine. Why the crude that's coming in from the Uinta Basin, we have to touch it and do four things to it. Every time we touch it, every time we do something to it, every time we heat it, every time we blend it, every time we send it back down the pipeline, you know, we hit the cash register.
It's interesting how, you know, businesses change, and you get good luck, you get bad luck, and you gotta deal with all of them. I mean, at FTAI Aviation, the parent that we spun the thing out of, I mean, we had COVID, we had Omicron, we had Russia stealing 500 planes. You know, Joe Adams, the CEO, said that "We didn't have bad luck. We had no luck at all." Then suddenly, you know, three years later, Boeing can't deliver planes, Airbus can't deliver planes, GE and Safran can't deliver engines. There's supply chain issues everywhere. The new engines, the Geared Turbofan and the LEAP, are a nightmare, and the industry is short-lived. I mean, for us, it's like going to Disneyland every day. It's crazy.
But, you know, you have these swings, and it's the same thing, it's the same thing in this business. But I think one of the things that I think is worth noting is that, you know, great businesses endure those things, and they get through them, and weak businesses don't get through them. And we're now in an enviable position. As I said, I think this thing is where FTAI was four years ago, which could make it interesting. Again, depending upon what your money looks like and how long you can sit and watch it grow. If you have 18-month, 36-month money, then I think it's an interesting trade. I'm out of time. Thank you all for coming. Appreciate it.