Good afternoon. My name is William Shelmire. I want to thank you all for joining us this afternoon. Presenting next is FTAI Infrastructure, which trades on the Nasdaq under the ticker symbol FIP. Representing the company today is their Head of Investor Relations, Alan Andreini.
Thank you. There's some new faces here today. Let me give you a quick history of the firm. This firm started back in 2012. It was a private company. At the time it was called Fortress Transportation and Infrastructure. Kind of a complicated situation in the sense that it was two businesses. Two businesses that Fortress has done extremely well in aviation. The other business is infrastructure. It's good to go with the strength of a company. If you want to do something in retail or in finance or in consumer or healthcare, we are the last place you want to go to. Okay. As it relates to infrastructure or aviation, we get that joke and get it at a pretty high level. We originally raised $300 million. It was done with a goal towards permanent capital.
In other words, we didn't want to have a private equity fund where seven, eight years out, you had to make sales. That's not the business. It was to be permanent capital. When we launched it, we were doing something that had never been done before, which was to go to people and say, "Look, we're going to start this company. We'll buy different pieces of it and put it together. We're going to take it public and keep it forever." That was difficult for the market to absorb. There were people that said, "Well, this should go to the equity guys, the public equity guys." Other people are saying, "This should go to the private equity guys, because that's how you're going to start." It took almost two years to raise the $300 million. Finally got done. State of Washington, RenaissanceRe in Bermuda.
Good group of investors. It finally got done. When it came time to take it public early in 2014, it was not a great environment for small IPOs. It was going to be around a $75 million IPO. The game plan was, let's go raise more money and then get it to a critical mass of around $1 billion. We went out. That was agreed to by the original investors. As I said, it took two years to put $300 million together. Because the performance had been so good, we raised $700 million in about 45 days. Got it all done, took it public May 15 of 2015. That's when the story begins. At that point in time, it was called Fortress Transportation and Infrastructure.
Those two businesses, the infrastructure business, which is this company, the spinoff, the orphan, that took all the leverage, and the original aviation business. It was an aviation leasing business. Not the cool, sexy business of new equipment where you say you're going to do the delivery in three years, and during that three-year period of time, you go out and you get your deals put together, then you take the deal down. That wasn't the business. The business was 15-year-old planes. We aren't sending our salesmen to the Paris Air Show, which is cool and hot and sexy. Our guys were meeting some guy from United for coffee in Hoboken. Not nearly as cool, but three times as profitable, and we're big on that part of the equation. It was launched. It was public. All the usual suspects.
Citi ran the deal, the usual suspects were in there, UBS, et cetera, et cetera. The problems that we had were not the performance, the problems that we had was it was, one, very tax efficient. K-1s, the dreaded K-1, which nobody wants to have. 40% of the market didn't want to see us because of the K-1s. There was also the issue of you couldn't go into any of the ETFs because of the K-1s. The bigger problem was it was not a pure play. In other words, there were guys who understood infrastructure who said, "I don't know the aviation business, and I don't want to learn it." There were guys who understood the aviation business and leasing but didn't want to take the time, effort, energy to understand the infrastructure side of the business. They didn't want to do it.
The game plan always was to separate the companies once we had critical mass. By around 2020, we did have critical mass. We split the companies in half. The orphan, the one that took most of the debt, is FTAI Infrastructure. The one that was left with not a lot of debt and great prospects was FTAI Aviation. When we split the companies in half, the combined value was around $17 a share. The current price of those stocks together is $240. It'd be safe to say that worked out pretty well. Now, the orphan. What do we do with the orphan? The orphan, which is over-levered right now, there are two ways that you solve that problem. You grow into your balance sheet, which was one option, or you make sales.
You bring your assets up, you make sales, that's what we're doing. The latest sale. Let me jump ahead here. We just sold Long Ridge. Let me go to the thing that shows all these. Long Ridge is a 485 MW power plant in Hannibal, Ohio. It is a plant that we just sold. We bought the land for around $25 million. We put around $600 million in to build it, took on some debt to do that, we just sold it for $1.5 billion. Right into the teeth of a very hot market for data centers and power. If you have power today, you're king. We just sold it. We're waiting for FERC approval. That will hopefully close no later than September 15th. When that happens, $1.15 billion worth of debt disappears.
There's an extra $350 million that comes out of that trade. $50 million will go into our pocket, and we'll take $300 million and pay down more holdco debt. The next things that are candidates for sale are Jefferson and Repauno. The Jefferson terminal is a terminal in Beaumont, Texas, that handles hydrocarbons. It handles primarily crude, diesel, gasoline, a little bit of more refined products. It's in Texas, and it's in a perfect location. The perfect location is we are a three-wood away from Exxon, and there are six pipelines under the Neches River connecting us to the largest refinery in the Western Hemisphere. We're also connected to Saudi Aramco. Their name in the U.S. is called Motiva, but it's Saudi Aramco. We spent $100 million to build a pipeline down there. Our two biggest customers are AAA credits, which is wonderful. That's the good news.
The bad news is you're working with AAA credits that are giants, so they move at a subglacial pace, and it's a 1,000-pound bear that you're dancing with. You dance the way and the speed that the 1,000-pound bear wants you to dance with him. That is another asset that we're looking at some really interesting deals down at Jefferson right now. We're doing about half the business that Exxon has into Mexico. It is gasoline and diesel. They're talking about doing a deal with us that would double the size of that business. That would be great business for us because there would be no CapEx. We're running at around 60% capacity right now. If we double that is going to be very high margin business for us. We're close, but being close with Exxon can take another week, two weeks, three weeks, four weeks.
We're close on that. Jefferson, we're getting some nice reverse inquiry on that. There may be some people that might want to partner with us on Jefferson. That is going to be an asset that's going to be sold. Repauno is another hydrocarbon facility. It is on the Delaware River, right across from Marcus Hook, the big energy transfer facility that handles natural gas liquids. We handle natural gas liquids. We're permitted for natural gas liquids, and that's a big deal on the East Coast. You can get permitted in Texas to do anything in about 20 minutes. That's the attitude that fortunately the people in Texas have. New Jersey, Pennsylvania, New York, Connecticut can take you five years, if you're lucky, to get permitted for things like that. We are permitted on the East Coast, which is a big deal.
The next big thing that's happening there, we've been building a 600,000-barrel tank, which will be used for propane, so it's refrigerated. That is going to kick in on January 1 of next year, and that'll annualize to around $80 million a year in EBITDA. It's basically break even right now. That asset will be sold at the right time. What you're going to have left, this is gone. This will close in the next 45 days. Jefferson to Repauno, probably over the next 12 to 18 months, will be sold as well. When we sell those two, we're going to end up with approximately $700 million. After we pay off the debt down at the asset level, we'll end up with around $700 million in excess cash, which will go to pay down more of the holdco debt.
What are we doing with all that money? We will go and continue to build out the top category, which is the short line rail business, Transtar and The Wheeling. Transtar was six railroads that we purchased from United States Steel, and that was purchased a little over three years ago. We purchased that for $640 million. We got a great price on that for two reasons. It was 95% U.S. Steel, so heavy-duty customer concentration. At that time, United States Steel was not a rose as a credit. That was kind of a cheeky credit, okay? We stepped in, you know what, when Nippon came in and made the offer. Major upgrade in credit. Which we never saw coming.
The other thing was that the White House got Nippon Steel to commit to putting $11 billion into both Gary and Pittsburgh, which is where the two main facilities are. That business, the short line railroad business, remember I said at the beginning, the things that we do poorly, the rail business is exactly what we do. It's the best of all the businesses at Fortress. We've probably done seven or eight rail acquisitions, in the private equity side of the business, and I think our worst-performing one was two and a half times on our money. An example of one of the deals that we did when the companies were still together, we bought the Central Maine and Quebec Railway for $14.5 million out of bankruptcy. We put $20 million into it. Four years later, we sold it to Canadian Pacific for $140 million.
We know the short line railroad business. The three major players in the short line railroad business are us, Genesee & Wyoming, which is now a part of Brookfield, and Watco, which is a private company. The game plan will be this, is that 18 to 24 months from now, these three assets will be gone, and you're going to have a short line railroad business that is going to be doing $300 million to $350 million in EBITDA with little debt trading at 15x . That is a stock that is not trading with a four handle anymore. One of the things that, I've said this a couple times here, is when we talk about this company, is that this is infrastructure. Infrastructure is two steps forward, one back. Two steps forward, one back.
If this all goes as planned, this is a double, triple, quadruple on the stock price. Here's the but, you can't put money into this that does not have duration. Meaning this is not Spotify. This is how many new customers did you get in Spotify, okay? What are the macros like? What is the implications of what's going on in the Middle East? You have to have a long-term view. If you don't have money that has duration, don't buy this stock. If you have money that's got 18 to 24-month duration, it's a great trade. Pays a dividend, tiny dividend, but it does pay a dividend. It's a cool business. It is a business that to understand it, you got to do major due diligence on the asset before you buy it. You care about diversification.
You'd just as soon not buy a short line railroad that is only doing agriculture or only doing packaged goods or aggregates. You really would like to buy a short line railroad that's very diversified in its user base. One of the nice things for us in the acquisition, because we're going to do more acquisitions in this space, is that when we bought U.S. Steel, we were 95% U.S. Steel. All the business, very little third-party business. We got it to 85%, then we did the acquisition with The Wheeling, which is one of the best short line railroads in the industry. We were very fortunate there when we bought that. We'd been trying to buy that for 10 years. When we bought it, there was no beauty contest, no investment bankers were involved.
It was a situation where the patriarch said he's leaving the business horizontal. He's going to be there forever. He unfortunately got sick, and the issues of estate planning became not theoretical. It became real. It took us about nine months to negotiate the deal, but the CEO knew, our CEO, Ken Nicholson, very well, and he wanted to turn it over to people that he knew were going to run it properly. We got it done. Like all private companies, in most private companies, when you take them over, and I don't know if this is indigenous just to the short line railroad business, but their real partner is the IRS. I mean, those things are dripping with expenses that are ridiculous.
Private planes and private cars and the nephew who's paid $1 million a year and spends most of his days at Pine Valley playing golf. Those guys go, okay? They know that. They just punch out with $1 billion, so the kids are going to be well taken care of. It's a great acquisition. You can do acquisitions in this space. You can have a short line railroad complex in Gary and in Pittsburgh. You can do an acquisition in Des Moines. You can do an acquisition in Spokane and get synergies in terms of your buying power for insurance or whatever. It's especially attractive, and there's a lot more synergy if the lines connect. One of the great things about The Wheeling and Transtar is they touch each other in about six different places.
There's a lot more things that you can do when you can exchange loads in a situation like that. That is basically the story. It is a story of us getting rid of the three bottom assets. As I said, Long Ridge is done. We expect that by September 15th, we'll have that closed. We've had preliminary conversations with FERC, and they don't see any issues. They're public employees, which means they're out of there at 5:01 every day. Don't try to reach them on weekends. That ain't going to happen. These guys have all gotten memos from the White House saying that if they ever get any complaints that things are slowed down, you're out of a job. And we're actually seeing that happen. And we do a lot of business with DOT and with FERC.
Depending upon your view on politics and whether you like the administration or do not like the administration, they have made things clear in D.C. that administrative slowdowns are not going to be tolerated. We are seeing that in spades, which is great for us. That is the story of the company. There is decks in the back and there is more if you want to go through those at any point in time. I will make certain for any of you who need my email, I will get it to you. Kind of the way we like to do this is there is third-party research done on us. There are, I think, three firms right now. We think two more firms are about to pick up coverage. We have gotten permission from these firms to forward to you their research.
Sometimes these are people that you do not have relationships with, so you did not have access to it. We are sending it to you. The other thing that we try to do is this, is that we want to make ourselves available. That is not 9:00 A.M. to 5:00 P.M., that is seven days a week. I will give you my business card with my cellphone number on it. If I happen to be pitching a little league game, I may be delayed in calling you back. Other than that, I will be available.
One of the things that we try to do here is that because we realize that you have got challenges in your job, we have challenges in ours, if we can help you other ways than the investment in this company or any of our other companies or FTAI Aviation, which I know some of you are invested in and know that asset. If you have got a question about something in a related area, not us, but a related area, we will give you an opinion and we will try to help you. It is off the record, obviously. We do not want our name associated, we cannot guarantee that the advice or counsel that we give you is 100% going to be accurate, but we will do our best because we understand that this is a two-way street. That is pretty much it.
Let me just see if there is any other kind of. That is the cap table and what it is going to look like. This is what now what it looks like. U.S. Steel is now around 24% of the business, and it is really kind of an advantage for us because in the rail space, as I said, the perfect short line railroad asset is a company that has got 10 different products. Okay? You will have seven, eight, nine, 10 guys who will show up to buy a short line railroad that is moving 10 different products. If you have a short line railroad that is only moving wheat, you may have two guys that show up for that because of the risk associated with few customers and the same product. For us, that is a great trade because we get to take the U.S. Steel piece down even further than 24%.
We've got an advantage, at least right now, to take some of these more concentrated areas. This is what the rail segment we think is going to look like. That's where we are right now with the cost savings that are coming and the revenue opportunities that we have. One of the wonderful situations that we had there was that when we knew about phase 2 at Repauno, which is the $80 million, which is going to kick in first quarter of next year. We knew that was happening, and we knew that the natural gas liquids, primarily the propane, was coming from Hopewell in Ohio. We knew that. We knew that the RFPs were going to go out sometime late in second half of this year.
We knew that those trains that had to be moved by train because there's no pipelines out of Hopewell, we knew that we had the trains. We also knew a little detail. The only railroad that serviced Hopewell was the Wheeling. When we were negotiating with the Wheeling, we said to them, "All right. What do your future plans look like? Show us your pipeline of deals." It wasn't in there. We knew it was going to be $20 million . That was almost unfair, but it helped get us a really good number.
Can we go back one second?
Yeah.
Did you say $220 or $350 was the target for on the standalone short haul?
Once we do acquisitions. With just these two right now, the target's $220.
$220 on what sort of debt structure, both at the railroad and corporate?
Yeah. The debt structure right now, most of the debt, let's go back here. Most of the debt of these assets are down at the asset level. It's not a recourse to the holdco. There's $1.3 billion worth of debt at the holdco, there's about $1 billion of preferred that we got from Ares to do The Wheeling acquisition. When we sell the latter two assets, we'll take $700 million of the holdco debt. That'll disappear, then at some point in time, as soon as possible, we'll get rid of the Ares preferred, which is PIK preferred at 10%.
I'm sorry. The corporate debt of $1 billion is on top of that? Or that is before you take out $700 million of it?
That's before we take $700 million out of it.
It'll be $300 million then.
Yeah, exactly.
$300 million debt, $1.3 billion, and another $1 billion of preferreds.
The $1 billion of preferred. I'm counting the preferred as debt almost.
The preferred debt is part of the one over there?
Yeah.
That goes down to $300 million.
Yeah.
Basically $1.7 billion.
Yeah. Something like that, exactly. The main mission in life for us right now is delever. Delever and get to a pure play railroad company as soon as possible. What you should expect, the next big announcements from us would be another rail acquisition, and two, the closing of the Long Ridge deal, which I said will take out $1.1 million of debt.
Can you walk through, what was the multiple that you sold Long Ridge? It looks like 15x.
We sold it at a much higher multiple than you would normally get for a 485 MW power plant. There was a good reason for that. We developed our own gas. In most cases, the biggest expense item that a power plant has in the U.S. is gas. You're buying the gas with a three handle. We developed our own gas, our lifting costs were like $1.15. That's the reason why you look at the multiple that we got for that and you said, "You guys must have taken hostages.
When we look at the EBITDA from that particular asset that you had in that.
Yeah, $160 million.
Huh?
$160 million annually.
Okay. That's gone. Then you also added $16 million of closing cost or of shutdown?
Shutdown?
Yeah. In your slide, not this one, the slide where you have the four items. You have an adjustment to the EBITDA because of shutdown costs or something like that.
Which page was that?
Eight. There. $14 million impact to adjusted EBITDA from shutdown. What is that?
Hold on. I'm trying to see where it is.
In the first line of Long Ridge.
Oh, wait a second. 14. Oh, the shutdown cost. Every five years in a power plant like that, you've got to do a very long extended maintenance period, and you got to shut it down. That's what that is. Now, normally with a plant when it's running, normally when you're not doing one of these big five-year deals, you're down for two weeks in the spring and you're down two weeks in the fall. That's scheduled. That's one of the reasons why if you happen to be an investor in FTAI Aviation where we announced a big aeroderivative power deal, that's a big deal right now because the data centers are now all. They went to the White House about two months ago and they all said, "We're not going to pull from the grid.
We're going to bring our own power." Aeroderivatives is one of the ways that you bring your own power.
I understand. Basically, you're portaling sort of the RailAmerica Inc.
Exactly. We built RailAmerica Inc. We were the ones who sold that to Genesee & Wyoming.
I see. This is RailAmerica Inc. 2.
We even call it that.
Okay.
Yeah. That's exactly what it is. We know that business and we've had great success. As I said, it's a tricky business because when you buy those businesses, you look at the EBITDA streams, you look at your customers, you look at where the contracts are and what they are. One of the most important parts of diligence when you're buying a short line railroad like that is the due diligence on the infrastructure, the equipment. What condition are the trains? What condition are the cars? What condition are the tracks, the ballast? Most importantly, what condition are the bridges? If you get the wrong bridge, you're looking at a $20 million, $30 million, $40 million issue.
One of the things that we do in that space is you go to the federal government and the state governments for grants, we've got a whole team of guys that that's their deal.
The only other thing I wanted to ask you is, at the time of RailAmerica Inc. when they were basically putting together.
Yes
There were a lot more short-term rail lines.
Yep.
How many are left?
There are about 450. It's a great question. There are around 450 in the U.S., which a number that blew my mind. There are 450 now. Most of them are private, most of them are family-owned. The Wheeling was a unique situation. We paid $1.05 billion for it, and it was big. It was a big chunky deal. Most of the deals are much smaller than that. One of the nice things that happened, by the way, was as soon as we announced the deal, two Class I railroads called The Wheeling and said, "Is there a topping provision in your deal? Can we top it and pay them a breakup?" The answer was, "Can't do it. Deal's done."
The other thing was we got calls from short lines who said, "If you ever want to sell The Wheeling, we want the first call because we will be your highest bid." Look, talk's cheap, but it was a nice call to get. We bought it right. We bought it right because there were soft issues there. The family wanting to take care of the business, wanted to take care of the employees, and we knew each other. The CEO of our company, Ken Nicholson, was close friends with the guy who sold it. As I said, there were no investment bankers to lie to both sides. It was a civilized acquisition. It was a civilized negotiation.
Right. It's just, I'm wondering how big the pool for you to come to that program of being up to $350 million, how many acquisitions would you have to make approximately?
I'll tell you, we're looking at acquisitions right now. The highest one I think we're looking at would be around $100 million purchase price, and we're looking at one which is a $20 million purchase price. There's a $50 million one we're looking at that would add $8 million to $10 million in EBITDA. You're going to have to do a series of them. You don't see a Wheeling that often. We were very lucky that we got that.
What's the status of the two new dispositions? Contract stage? Letter of intent stage?
Not letter of intent stage. On Jefferson, we're getting some interesting reverse inquiry right now, so we'll see where that goes.
There's a formal process, so you have an agent to go through?
No, we have not started a formal process yet. We want to get Repauno farther along. Both those, frankly, Jefferson is, as I said, a three-wood away from the largest refinery in the Western Hemisphere, the new Exxon one, 625,000 barrels a day, and we're pipeline connected to the second-largest refinery in the Western Hemisphere, Saudi Aramco's, called Motiva. If we screw this up from here, we should be sent to jail. The location is perfect. As I said, it takes time. Infrastructure, when you're doing greenfield, there's some people that try to buy these assets at 8x, 9x, 10x and hope they trade at 12x, 13x, 14x . We've taken a different approach. We do a greenfield. We'll build it for 3x to 4x and hope it trades at 13x to 14x times. It takes longer. You just make more money, but it takes longer.
It was interesting, when we bought Jefferson, it was fallow land, but it was the great location. There was a guy who had just sold Oiltanking to Enterprise. He was the CEO of Enterprise, and he punched out a very big number, and we tried to hire him as the CEO. This was back in 2016. He said, "Look, you can't lose with this location. It's just amazing." Okay. He said, "It's going to take 10 years," he said, "because that's how long it took us to build Oiltanking." We said, "No, we'll get it done in five years." He was right. We were wrong. It took longer than expected. It just takes time, because as I said, these behemoths, the guys who need these assets, they move at literally subglacial pace. It's almost like dealing with the railroad administration. It's really slow.
These deals are what, one year away normally?
I would think so. I think within 18 months, all that's gone, and that's what's left. As I said, don't put in money that does not have duration. We have 43 seconds for me to entertain you even more.
The Repauno assets break even today and next year can do $80 million of EBITDA?
Yeah. If everything happens as planned and everybody starts when they're supposed to start. The names that we have in there are, the biggest name is, we haven't given out the name yet, but it is one of the Seven Sisters oil companies. It's big and snotty and a good name.
What are those assets? What appears trade for it now?
Pardon me?
[audio distortion] What appears trade for it now in a second?
What appears?
Like what multiple on that $80 million?
Probably 10x-12x, something like that. We think today, tonight, we've done some of the parts, we've done what we would net, we think tonight the company's worth $12 a share. If we do these acquisitions the way we think, you get to 15x at a higher number. This isn't brain surgery. This is kinda
Science.
Yeah. That's what it is. Thank you all. Appreciate the time