FTAI Infrastructure Inc. (FIP) is a diversified infrastructure investment and operations company that has carved out a unique niche in the sector. With its spin-off from Fortress Transportation and Infrastructure Investors LLC (FTAI) in 2021, FTAI Infrastructure has embarked on a journey to capitalize on the growing demand for critical infrastructure assets across North America.
Business Overview and History: FTAI Infrastructure was formed on December 13, 2021, as a subsidiary of FTAI, inheriting a diverse portfolio of infrastructure assets spanning the railroad, ports and terminals, power and gas, and sustainability and energy transition sectors. The company was initially established as FTAI Infrastructure LLC, a Delaware limited liability company, before converting to a Delaware corporation and becoming a publicly-traded company in 2022.
The spin-off from FTAI was designed to allow FTAI Infrastructure to operate as an independent, standalone public company focused on its infrastructure assets and investments. This strategic move enabled the company to concentrate on actively managing and growing its core infrastructure businesses.
While FTAI Infrastructure itself is a relatively new entity, the underlying assets that comprise its business have much longer operational histories. The railroad assets, for instance, have been providing essential freight rail services to manufacturing and production facilities for decades. Similarly, the Jefferson Terminal and Repauno port facilities have been strategically important energy infrastructure assets for many years.
Prior to the spin-off, FTAI had built a diversified portfolio of infrastructure assets through strategic acquisitions. This included the acquisition of Transtar, a group of six freight railroads and one switching company, in 2021, and Jefferson Terminal, a multi-modal crude oil and refined products terminal, in 2015. FTAI also developed the Repauno site, a 1,630-acre deep-water port located along the Delaware River, over the course of several years leading up to the spin-off.
FTAI Infrastructure operates primarily in North America and does not have significant operations in other geographic markets. The company has five reportable business segments: Railroad, Jefferson Terminal, Repauno, Power and Gas, and Sustainability and Energy Transition.
Financial Performance and Ratios: As of September 30, 2024, FTAI Infrastructure reported total assets of $2.44 billion and total liabilities of $1.82 billion, resulting in a debt-to-equity ratio of 6.09. The company's current ratio stood at 1.42, indicating a strong liquidity position.
For the nine months ended September 30, 2024, FTAI Infrastructure generated total revenue of $250.73 million, a 5% increase compared to the same period in 2023. However, the company reported a net loss of $141.39 million, compared to a net loss of $119.83 million in the prior-year period. This was primarily due to higher operating expenses, including a $4.37 million increase in acquisition and transaction costs.
FTAI Infrastructure's adjusted EBITDA, a key performance metric, reached $98.42 million for the nine-month period, up 32% year-over-year. The company's adjusted EBITDA margin stood at 39.2%, demonstrating its ability to generate solid profitability from its diversified asset base.
For the most recent fiscal year (2023), FTAI Infrastructure reported revenue of $320.47 million, net income of -$121.34 million, operating cash flow of $5.51 million, and free cash flow of -$95.23 million.
In the most recent quarter (Q3 2024), the company generated revenue of $83.31 million, representing a 3.2% year-over-year growth. Net income for the quarter was -$42.96 million, while operating cash flow and free cash flow were $24.27 million and $52.89 million, respectively.
Liquidity: FTAI Infrastructure maintains a strong liquidity position, as evidenced by its current ratio of 1.42. This indicates that the company has sufficient short-term assets to cover its short-term liabilities, providing financial flexibility and stability. The quick ratio also stands at 1.42 as of September 30, 2024.
The company's cash balance as of September 30, 2024, was $144.63 million. FTAI Infrastructure has a $75 million revolving credit facility, of which $44.25 million was outstanding as of the same date, providing additional financial flexibility.
Operational Highlights and Outlook: During the third quarter of 2024, FTAI Infrastructure continued to make progress across its business segments. In the Railroad segment, Transtar delivered another strong quarter with $21.1 million in adjusted EBITDA, driven by steady carload volumes and rates. The company is actively pursuing acquisitions to further expand its rail operations and expects to maintain an organic EBITDA growth rate of around 15% annually.
At the Jefferson Terminal segment, the company is on track to bring online two new projects in 2025 that are expected to contribute $20 million in annual EBITDA. Additionally, FTAI Infrastructure is in advanced negotiations for several new contracts that could add another $60 million in annual EBITDA to the segment.
In the Repauno segment, the company signed its first long-term contract for the Phase 2 transloading system and has commenced construction. FTAI Infrastructure plans to raise $300 million in low-cost tax-exempt debt to fully fund the Phase 2 project, which it expects will contribute $60-$70 million in annual EBITDA once completed.
At Long Ridge, the company is preparing to refinance its existing debt and reset the pricing on its power sale hedges, which it estimates could result in an additional $50 million in annual EBITDA. FTAI Infrastructure is also advancing several other initiatives at Long Ridge, including a potential upgrade to increase the power plant's capacity to 505 megawatts and negotiations with data center developers for behind-the-meter projects.
In terms of guidance, FTAI Infrastructure reported a record adjusted EBITDA of $36.9 million in the third quarter of 2024, representing an 8% increase from the second quarter of 2024 and a 50% year-over-year increase from the third quarter of 2023. The company currently has line of sight under executed contracts and commitments representing approximately $70 million of incremental annual EBITDA. When combined with their current run rate, this represents total company annual EBITDA of approximately $220 million.
FTAI Infrastructure estimates that if they are successful in converting their current pipeline of new business opportunities into contracted business, they have the potential to achieve annual EBITDA in excess of $300 million, excluding the impact of any new investments or acquisitions.
At Long Ridge, the company expects recent capacity auction results taking effect in June 2025 to represent a $32 million increase in annual revenue and EBITDA, or $16 million for their 50% share.
Segment Performance: The Railroad segment, comprising six freight railroads and one switching company, saw an 11.3% year-over-year increase in revenues during the nine months ended September 30, 2024. This growth was primarily due to an increase in both carloads and rates per car. Segment Adjusted EBITDA increased 9.9% year-over-year.
The Jefferson Terminal segment, which includes a multi-modal crude oil and refined products terminal in Beaumont, Texas, reported a 6.7% year-over-year increase in revenues for the same period. This growth was primarily driven by an increase in average crude oil throughput volumes. Segment Adjusted EBITDA increased 9.5% year-over-year.
The Repauno segment, consisting of a 1,630-acre deep-water port along the Delaware River, saw its revenues increase by $5.3 million year-over-year during the nine months ended September 30, 2024. This growth was primarily due to the commencement of a butane throughput contract. Segment Adjusted EBITDA increased by $2.9 million year-over-year.
The Power and Gas segment and the Sustainability and Energy Transition segment are comprised of equity method investments, with their performance reflected through FTAI Infrastructure's share of the equity in losses/earnings of these unconsolidated entities.
Risks and Challenges: While FTAI Infrastructure has demonstrated its ability to navigate the infrastructure landscape, the company is not without its risks and challenges. The highly regulated nature of the rail, energy, and port industries exposes the company to potential changes in laws and regulations that could impact its operations and profitability.
Additionally, FTAI Infrastructure's reliance on a limited number of large customers, particularly in its Railroad and Jefferson Terminal segments, presents concentration risk. The company's financial performance could be adversely affected if any of these key customers were to experience difficulties or reduce their business with FTAI Infrastructure.
The company's ambitious growth plans, including acquisitions and the development of new projects, also come with execution risks. FTAI Infrastructure must successfully integrate any acquired businesses, complete construction projects on time and within budget, and secure the necessary financing to fund its growth initiatives.
Conclusion: FTAI Infrastructure has positioned itself as a leading player in the infrastructure investment and operations space, leveraging its diversified asset portfolio and expertise to capitalize on the growing demand for critical infrastructure. With a focus on organic growth, strategic acquisitions, and the development of new projects, the company is well-positioned to continue its trajectory of value creation for shareholders. The company's strong performance across its business segments and its ambitious growth plans demonstrate its potential for future success.
However, investors should closely monitor the company's ability to navigate the regulatory landscape, manage customer concentration risks, and execute on its growth plans in order to mitigate potential downside risks. The company's ability to achieve its projected EBITDA growth and successfully complete its ongoing projects will be crucial in determining its long-term success in the competitive infrastructure sector.