SEC Filing | FTAI Infrastructure

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fip-20230331

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission file number 001-41370

https://cdn.kscope.io/944595f4a587608450bfda1b3196d0ff-FTAI_Infrastructure_Logo.jpg

FTAI INFRASTRUCTURE INC.

(Exact name of registrant as specified in its charter)

Delaware

87-4407005

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

1345 Avenue of the Americas, 45th Floor

New York

10105

(Address of principal executive offices)

(Zip Code)

(Registrant’s telephone number, including area code) (212) 798-6100

(Former name, former address and former fiscal year, if changed since last report) N/A

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

Trading Symbol:

Name of exchange on which registered:

Common Stock, par value $0.01 per share

FIP

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

As of May 1, 2023, the number of outstanding shares of the registrant’s common stock was 99,445,074 shares.

FORWARD-LOOKING STATEMENTS AND RISK FACTORS SUMMARY

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact but instead are based on our present beliefs and assumptions and on information currently available to us. You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” “target,” “projects,” “contemplates” or the negative version of those words or other comparable words. Any forward-looking statements contained in this report are based upon our historical performance and on our current plans, estimates and expectations in light of information currently available to us. The inclusion of this forward-looking information should not be regarded as a representation by us, that the future plans, estimates or expectations contemplated by us will be achieved.

Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business, prospects, growth strategy and liquidity. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. The following is a summary of the principal risk factors that make investing in our securities risky and may materially adversely affect our business, financial condition, results of operations and cash flows. This summary should be read in conjunction with the more complete discussion of the risk factors we face, which are set forth in Part II, Item 1A. “Risk Factors” of this report. We believe that these factors include, but are not limited to:

•our ability to successfully operate as a standalone public company;

•changes in economic conditions generally and specifically in our industry sectors, and other risks relating to the global economy, including, but not limited to, the Russia-Ukraine conflict, the ongoing COVID-19 pandemic and other public health crises, and any related responses or actions by businesses and governments;

•reductions in cash flows received from our assets;

•our ability to take advantage of acquisition opportunities at favorable prices;

•a lack of liquidity surrounding our assets, which could impede our ability to vary our portfolio in an appropriate manner;

•the relative spreads between the yield on the assets we acquire and the cost of financing;

•adverse changes in the financing markets we access affecting our ability to finance our acquisitions;

•customer defaults on their obligations;

•our ability to renew existing contracts and enter into new contracts with existing or potential customers;

•the availability and cost of capital for future acquisitions;

•concentration of a particular type of asset or in a particular sector;

•competition within the rail, energy and intermodal transport sectors;

•the competitive market for acquisition opportunities;

•risks related to operating through joint ventures, partnerships, consortium arrangements or other collaborations with third parties;

•our ability to successfully integrate acquired businesses;

•obsolescence of our assets or our ability to sell our assets;

•exposure to uninsurable losses and force majeure events;

•infrastructure operations and maintenance may require substantial capital expenditures;

•the legislative/regulatory environment and exposure to increased economic regulation;

•exposure to the oil and gas industry’s volatile oil and gas prices;

•our ability to maintain our exemption from registration under the Investment Company Act of 1940 and the fact that maintaining such exemption imposes limits on our operations;

•our ability to successfully utilize leverage in connection with our investments;

•foreign currency risk and risk management activities;

•effectiveness of our internal control over financial reporting;

•exposure to environmental risks, including natural disasters, increasing environmental legislation and the broader impacts of climate change;

•changes in interest rates and/or credit spreads, as well as the success of any hedging strategy we may undertake in relation to such changes;

•actions taken by national, state, or provincial governments, including nationalization, or the imposition of new taxes, could materially impact the financial performance or value of our assets;

•our dependence on our Manager and its professionals and actual, potential or perceived conflicts of interest in our relationship with our Manager;

•effects of the merger of Fortress Investment Group LLC with affiliates of SoftBank Group Corp.;

•volatility in the market price of our stock;

•the inability to pay dividends to our stockholders in the future; and

•other risks described in the “Risk Factors” section of this report.

These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report. The forward-looking statements made in this report relate only to events as of the date on which the statements are made. We do not undertake any obligation to publicly update or review any forward-looking statement except as required by law, whether as a result of new information, future developments or otherwise.

If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements. Furthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us.

FTAI INFRASTRUCTURE INC.

INDEX TO FORM 10-Q


	PART I - FINANCIAL INFORMATION
Item 1.	Unaudited Consolidated and Combined Consolidated Financial Statements of F TAI Infrastructure Inc.:	5
	Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022	5
	Consolidated and Combined Consolidated Statements of Operations for the thre e months ended March 3 1 , 202 3 and 202 2	6
	Consolidated and Combined Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2023 and 2022	7
	C onsolidated and Combined Consolidated Statement of Changes in Equity for the thre e months ended March 3 1 , 202 3 and 20 2 2	8
	Consolidated and Combined Consolidated Statements of Cash Flows for the three months ended March 3 1 , 202 3 and 202 2	9
	Notes to Consolidated and C ombined C onsolidated Financial Statements	10
	Note 1: Organization	10
	Note 2: Basis of Presentation and Summary of Significant Accounting Policies	10

	Note 3 : Leasing Equipment, net	16

	Note 4 : Property, Plant and Equipment, net	17
	Note 5 : Investments	17
	Note 6 : Intangible Assets, net	20
	Note 7 : Debt, net	21
	Note 8 : Fair Value Measurements	22
	Note 9 : Revenues	23
	Note 1 0 : Equity-Based Compensation	24
	Note 1 1 : Retirement Benefit Plans	24
	Note 1 2 : Income Taxes	25
	Note 1 3 : Management Agreement and Affiliate Transactions	26
	Note 1 4 : Segment Information	28
	Note 1 5 : Redeemable Preferred Stock	34
	Note 1 6 : Earnings per Share and Equity	35
	Note 17 : Commitments and Contingencies	35
	Note 18 : Subsequent Events	36
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 4.	Controls and Procedures	53
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	54
Item 1A.	Risk Factors	54
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	74
Item 3.	Defaults Upon Senior Securities	74
Item 4.	Mine Safety Disclosures	74
Item 5.	Other Information	74
Item 6.	Exhibits	75

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

FTAI INFRASTRUCTURE INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share and per share data)


		(Unaudited)
	Notes	March 31, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	2	$	39,963	$	36,486
Restricted cash	2	68,470		113,156
Accounts receivable, net	2	71,798		60,807
Other current assets	2	58,820		67,355
Total current assets		239,051		277,804
Leasing equipment, net	3	34,631		34,907
Operating lease right-of-use assets, net		70,163		71,015

Property, plant, and equipment, net	4	1,685,242		1,673,808
Investments	5	72,320		73,589
Intangible assets, net	6	58,309		60,195
Goodwill	2	260,252		260,252
Other assets	2	27,094		26,829
Total assets		$	2,447,062	$	2,478,399

Liabilities
Current liabilities:
Accounts payable and accrued liabilities	2	$	132,654	$	136,048

Operating lease liabilities		7,124		7,045
Other current liabilities	2	14,905		16,488
Total current liabilities		154,683		159,581
Debt, net	7	1,274,149		1,230,157
Operating lease liabilities		62,644		63,147
Other liabilities		156,001		236,130
Total liabilities		1,647,477		1,689,015

Commitments and contingencies	17

Redeemable preferred stock ($0.01 par value per share; 200,000,000 shares authorized; 300,000 shares issued and outstanding as of March 31, 2023 and December 31, 2022; redemption amount of $448.2 million at March 31, 2023 and December 31, 2022)	15	279,160		264,590

Equity

Common stock ($0.01 par value per share; 2,000,000,000 shares authorized; 99,445,074 shares issued and outstanding as of March 31, 2023 and December 31, 2022)		994		994
Additional paid in capital		892,992		911,599
Accumulated deficit		(86,856)		(60,837)
Accumulated other comprehensive loss		(247,293)		(300,133)
Stockholders' equity		559,837		551,623
Non-controlling interest in equity of consolidated subsidiaries		(39,412)		(26,829)
Total equity		520,425		524,794
Total liabilities, redeemable preferred stock and equity		$	2,447,062	$	2,478,399

See accompanying notes to consolidated and combined consolidated financial statements.

FTAI INFRASTRUCTURE INC.

CONSOLIDATED AND COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(Dollars in thousands, except share and per share data)


		Three Months Ended March 31,
	Notes	2023		2022
Revenues

Total revenues	9	$	76,494	$	46,148

Expenses
Operating expenses	2	65,162		38,068
General and administrative		3,201		2,430
Acquisition and transaction expenses		269		4,236
Management fees and incentive allocation to affiliate	13	2,982		4,161
Depreciation and amortization	3, 4, 6	20,135		16,996
Asset impairment		141		—

Total expenses		91,890		65,891

Other income (expense)
Equity in earnings (losses) of unconsolidated entities	5	4,366		(22,043)
Loss on sale of assets, net		(124)		—

Interest expense		(23,250)		(6,459)
Other income (expense)		221		(459)
Total other expense		(18,787)		(28,961)
Loss before income taxes		(34,183)		(48,704)
Provision for income taxes	12	1,729		1,584


Net loss		(35,912)		(50,288)

Less: Net loss attributable to non-controlling interests in consolidated subsidiaries		(9,893)		(7,466)

Less: Dividends and accretion on redeemable preferred stock		14,570		—
Net loss attributable to stockholders/Former Parent		$	(40,589)	$	(42,822)

Loss per share:	16

Basic		$	(0.39)	$	(0.43)


Diluted		$	(0.40)	$	(0.43)

Weighted average shares outstanding:
Basic		102,787,640		99,387,467
Diluted		102,787,640		99,387,467

See accompanying notes to consolidated and combined consolidated financial statements.

FTAI INFRASTRUCTURE INC.

CONSOLIDATED AND COMBINED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)

(Dollars in thousands)


	Three Months Ended March 31,
	2023		2022
Net loss	$	(35,912)	$	(50,288)
Other comprehensive income (loss):
Other comprehensive income (loss) related to equity method investees, net	52,852		(96,948)
Change in pension and other employee benefit accounts	(12)		—
Comprehensive income (loss)	16,928		(147,236)

Comprehensive loss attributable to non-controlling interest	(9,893)		(7,466)

Comprehensive income (loss) attributable to stockholders/Former Parent	$	26,821	$	(139,770)

See accompanying notes to consolidated and combined consolidated financial statements.

FTAI INFRASTRUCTURE INC.

CONSOLIDATED AND COMBINED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

(Dollars in thousands)


	Three Months Ended March 31, 2023
	Common Stock		Additional Paid In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Non-Controlling Interest in Equity of Consolidated Subsidiaries		Total Equity
Equity - December 31, 2022	$	994	$	911,599	$	(60,837)	$	(300,133)	$	(26,829)	$	524,794
Net loss					(26,019)				(9,893)		(35,912)
Other comprehensive income							52,840				52,840
Total comprehensive (loss) income	—		—		(26,019)		52,840		(9,893)		16,928
Settlement of equity-based compensation									(90)		(90)


Acquisition of consolidated subsidiary			(953)						(3,495)		(4,448)


Dividends declared on common stock			(3,084)								(3,084)

Dividends and accretion on redeemable preferred stock			(14,570)								(14,570)
Equity-based compensation									895		895
Equity - March 31, 2023	$	994	$	892,992	$	(86,856)	$	(247,293)	$	(39,412)	$	520,425


	Three Months Ended March 31, 2022
	Net Former Parent Investment		Accumulated Other Comprehensive Loss		Non-Controlling Interest in Equity of Consolidated Subsidiaries		Total Equity
Equity - December 31, 2021	$	1,617,601	$	(155,464)	$	(91)	$	1,462,046
Net loss	(42,822)				(7,466)		(50,288)
Other comprehensive loss			(96,948)				(96,948)
Total comprehensive loss	(42,822)		(96,948)		(7,466)		(147,236)



Net transfers from Former Parent	34,270						34,270



Equity-based compensation					709		709
Equity - March 31, 2022	$	1,609,049	$	(252,412)	$	(6,848)	$	1,349,789

See accompanying notes to consolidated and combined consolidated financial statements.

FTAI INFRASTRUCTURE INC.

CONSOLIDATED AND COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(Dollars in thousands)


	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net loss	$	(35,912)	$	(50,288)
Adjustments to reconcile net loss to net cash used in operating activities:
Equity in (earnings) losses of unconsolidated entities	(4,366)		22,043

Loss on sale of assets, net	124		—


Equity-based compensation	895		709
Depreciation and amortization	20,135		16,996

Asset impairment	141		—
Change in deferred income taxes	1,547		1,512
Change in fair value of non-hedge derivative	1,125		766

Amortization of deferred financing costs	1,429		841
Amortization of bond discount	1,045		—
(Benefit from) provision for credit losses	(165)		25

Change in:
Accounts receivable	(10,825)		13,744

Other assets	8,140		(2,315)
Accounts payable and accrued liabilities	1,812		(19,488)
Management fees payable to affiliate	4,888		—
Other liabilities	(2,157)		1,306
Net cash used in operating activities	(12,144)		(14,149)

Cash flows from investing activities:

Investment in unconsolidated entities	(2,126)		(1,637)


Acquisition of consolidated subsidiary	(4,448)		—

Acquisition of property, plant and equipment	(39,861)		(51,728)
Investment in promissory notes and loans	(20,500)		—



Proceeds from sale of property, plant and equipment	93		2,092




Net cash used in investing activities	(66,842)		(51,273)

Cash flows from financing activities:
Proceeds from debt	41,600		9,450
Payment of deferred financing costs	(649)		(277)


Cash dividends - common stock	(3,084)		—

Net transfers from Former Parent, net	—		34,270
Settlement of equity-based compensation	(90)		—

Net cash provided by financing activities	37,777		43,443

Net decrease in cash and cash equivalents and restricted cash	(41,209)		(21,979)
Cash and cash equivalents and restricted cash, beginning of period	149,642		301,855
Cash and cash equivalents and restricted cash, end of period	$	108,433	$	279,876

Supplemental disclosure of non-cash investing and financing activities:
Acquisition of property, plant and equipment	$	(2,245)	$	—

Dividends and accretion on redeemable preferred stock	(14,570)		—
Non-cash change in equity method investment	52,852		(96,948)

See accompanying notes to consolidated and combined consolidated financial statements.

FTAI INFRASTRUCTURE INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

1. ORGANIZATION

FTAI Infrastructure Inc. (“we”, “us”, “our”, or the “Company”) is a Delaware corporation and was originally formed as a limited liability company on December 13, 2021 in connection with the spin-off of the infrastructure business (“FTAI Infrastructure”) of FTAI Aviation Ltd. (previously Fortress Transportation and Infrastructure Investors LLC, “FTAI” or “Former Parent”). The Company owns and operates (i) five freight railroads and one switching company that provide rail service to certain manufacturing and production facilities (“Transtar”), (ii) a multi-modal crude oil and refined products terminal in Beaumont, Texas (“Jefferson Terminal”), (iii) a deep-water port located along the Delaware River with an underground storage cavern, a multipurpose dock, a rail-to-ship transloading system and multiple industrial development opportunities (“Repauno”), (iv) an equity method investment in a multi-modal terminal located along the Ohio River with multiple industrial development opportunities, including a power plant (“Long Ridge”), and (v) an equity method investment in two ventures developing battery and metal recycling technology (“Aleon” and “Gladieux”). Additionally, we own and lease shipping containers (“Containers”) and operate a railcar cleaning business (“KRS”) as well as an operating company that provides roadside assistance services for the intermodal and over-the-road trucking industries (“FYX”). We have five reportable segments: (i) Railroad, (ii) Jefferson Terminal, (iii) Repauno, (iv) Power and Gas, and (v) Sustainability and Energy Transition, which all operate in the infrastructure sector (see Note 14).

On August 1, 2022 (the “Spin-off Date”), FTAI distributed to the holders of FTAI common shares, one share of FTAI Infrastructure Inc. common stock for each FTAI common share held by such shareholder at the close of business on July 21, 2022 and we became an independent, publicly-traded company trading on The Nasdaq Global Select Market under the symbol “FIP.” The Company is headquartered in New York, New York.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: Unaudited Consolidated and Combined Consolidated Financial Statements

The Company’s financial statements for the periods through the Spin-off Date are combined consolidated financial statements. The Company’s financial statements for the period after the Spin-off Date are consolidated financial statements based on the reported results of FTAI Infrastructure Inc. as a standalone company.

The historical results of operations, financial position, and cash flows of FTAI Infrastructure represented in the combined consolidated financial statements may not be indicative of what they would have been had FTAI Infrastructure actually been a separate standalone entity during such periods, nor are they necessarily indicative of our future results of operations, financial position, and cash flows.

Basis of Presentation: Prior to spin-off

The Company’s financial statements for the periods through the Spin-off Date were prepared on a standalone basis as if the operations had been conducted independently from the Former Parent and have been derived from the consolidated financial statements and accounting records of the Former Parent. Accordingly, Former Parent’s net investment in our operations (Net Former Parent investment) was shown in lieu of stockholders’ equity in the accompanying combined consolidated financial statements, which include the historical operations comprising the infrastructure business of FTAI.

Prior to the Spin-off Date, the combined consolidated financial statements include certain assets and liabilities that have historically been held by the Former Parent but are specifically identifiable or otherwise attributable to FTAI Infrastructure. All significant intercompany transactions between Former Parent and FTAI Infrastructure have been included as components of Net Former Parent investment in the combined consolidated financial statements, as they are to be considered effectively settled upon effectiveness of the spin-off.

The combined consolidated financial statements are presented as if our businesses had been combined for all periods presented.

Principles of Combination—FTAI Infrastructure has elected the principles of combined consolidated financial statements as the basis of presentation for the periods through the Spin-off Date due to common ownership and management of the entities, which includes the financial results of the Railroad, Jefferson Terminal, Repauno, Power and Gas, and Sustainability and Energy Transition segments.

Cash and Cash Equivalents—The Cash and Cash Equivalents reflected in the financial statements through the Spin-off Date are Cash and Cash Equivalents that were legally held by FTAI Infrastructure during the periods presented in the financial statements and are directly attributed to and used in the operations of FTAI Infrastructure.

Debt and the Corresponding Interest Expense—The Debt reflected in the financial statements through the Spin-off Date was debt that was directly attributable to, and legally incurred by, FTAI Infrastructure. The corresponding interest expense presented in the financial statements was derived solely from the Debt directly attributed to FTAI Infrastructure.

FTAI INFRASTRUCTURE INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

Corporate Function—For the periods through the Spin-off Date, the combined consolidated financial statements include all revenues and costs directly attributable to FTAI Infrastructure and an allocation of certain expenses. The Former Parent was externally managed by the Manager, which performed the Former Parent’s corporate function, and incurred a variety of expenses including, but not limited to, information technology, accounting, treasury, tax, legal, corporate finance and communications. For purposes of the Combined Consolidated Statements of Operations, an allocation of these expenses was included to reflect our portion of such corporate overhead from the Former Parent. The charges reflected have either been specifically identified or allocated based on an estimate of time spent on FTAI Infrastructure. These allocated costs were recorded in general and administrative, and acquisition and transaction expenses in the Combined Consolidated Statements of Operations. We believe the assumptions regarding allocations of the Former Parent’s Corporate expenses are reasonable. Nevertheless, the allocations may not be indicative of the actual expense that would have been incurred had FTAI Infrastructure operated as an independent, standalone public entity, nor are they indicative of the Company’s future expenses. Actual costs that may have been incurred if FTAI Infrastructure had been a standalone company would depend on a number of factors, including the organizational structure, what functions were outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure. The Former Parent funded FTAI Infrastructure’s operating and investing activities as needed. Cash transfers to and from the Former Parent are reflected in the Combined Consolidated Statements of Cash Flows as “Net transfers from Former Parent”. Refer to Note 13 for additional discussion on corporate costs allocated from the Former Parent that are included in these combined consolidated financial statements. Subsequent to the Spin-off Date, the Company operated as a standalone company based on actual expenses incurred.

Unaudited Interim Financial Information—The accompanying interim Consolidated Balance Sheet as of March 31, 2023, and the Consolidated and Combined Consolidated Statements of Operations, Comprehensive Income (Loss), Changes in Equity and Cash Flows for the three months ended March 31, 2023 and 2022 are unaudited. These unaudited interim consolidated and combined consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). In the opinion of our management, the unaudited interim consolidated and combined consolidated financial statements include all adjustments necessary for the fair presentation of our financial position as of March 31, 2023, the results of operations, comprehensive income (loss), changes in equity and cash flows for the three months ended March 31, 2023 and 2022. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any other period.

Principles of Consolidation—We consolidate all entities in which we have a controlling financial interest and control over significant operating decisions, as well as variable interest entities (“VIEs”) in which we are the primary beneficiary. All significant intercompany transactions and balances have been eliminated. All adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The ownership interest of other investors in consolidated subsidiaries is recorded as non-controlling interest.

We use the equity method of accounting for investments in entities in which we exercise significant influence but which do not meet the requirements for consolidation. Under the equity method, we record our proportionate share of the underlying net income (loss) of these entities as well as the proportionate interest in adjustments to other comprehensive income (loss).

Use of Estimates—The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated and combined consolidated financial statements and the reported amounts of revenues and expenses during the reporting period, including allocations from the Former Parent during the period prior to the spin-off. Actual results could differ from those estimates.

Risks and Uncertainties—In the normal course of business, we encounter several significant types of economic risk including credit, market, and capital market risks. Credit risk is the risk of the inability or unwillingness of a lessee, customer, or derivative counterparty to make contractually required payments or to fulfill its other contractual obligations. Market risk reflects the risk of a downturn or volatility in the underlying industry segments in which we operate, which could adversely impact the pricing of the services offered by us or a lessee’s or customer’s ability to make payments. Capital market risk is the risk that we are unable to obtain capital at reasonable rates to fund the growth of our business or to refinance existing debt facilities. We do not have significant exposure to foreign currency risk as all of our leasing and revenue arrangements are denominated in U.S. dollars.

Variable Interest Entities—The assessment of whether an entity is a VIE and the determination of whether to consolidate a VIE requires judgment. VIEs are defined as entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. A VIE is required to be consolidated by its primary beneficiary, and only by its primary beneficiary, which is defined as the party who has the power to direct the activities of a VIE that most significantly impact its economic performance and who has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

FTAI INFRASTRUCTURE INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

Delaware River Partners LLC

During 2016, through Delaware River Partners LLC (“DRP”), a consolidated subsidiary, we purchased the assets of Repauno, which consisted primarily of land, a storage cavern, and riparian rights for the acquired land, site improvements and rights. Upon acquisition there were no operational processes that could be applied to these assets that would result in outputs without significant green field development. We currently hold an approximately 98% economic interest, and a 100% voting interest in DRP. DRP is solely reliant on us to finance its activities and therefore is a VIE. We concluded that we are the primary beneficiary; and accordingly, DRP has been presented on a consolidated basis in the accompanying consolidated and combined consolidated financial statements. Total VIE assets of DRP were $302.6 million and $306.0 million, and total VIE liabilities of DRP were $34.9 million and $34.1 million as of March 31, 2023 and December 31, 2022, respectively.

Cash and Cash Equivalents—We consider all highly liquid short-term investments with a maturity of 90 days or less when purchased to be cash equivalents.

Restricted Cash—Restricted cash consists of prepaid interest and principal pursuant to the requirements of certain of our debt agreements (see Note 7) and other qualifying construction projects at Jefferson Terminal.

Property, Plant, and Equipment, Leasing Equipment and Depreciation—Property, plant and equipment and leasing equipment are stated at cost (inclusive of capitalized acquisition costs, where applicable) and depreciated using the straight-line method, over their estimated useful lives, to estimated residual values which are summarized as follows:


Asset	Range of Estimated Useful Lives	Residual Value Estimates
Railcars and locomotives	40 - 50 years from date of manufacture	Scrap value at end of useful life
Track and track related assets	15 - 50 years from date of manufacture	Scrap value at end of useful life
Land, site improvements and rights	N/A	N/A
Bridges and tunnels	15 - 55 years	Scrap value at end of useful life
Buildings and site improvements	20 - 30 years	Scrap value at end of useful life
Railroad equipment	3 - 15 years from date of manufacture	Scrap value at end of useful life
Terminal machinery and equipment	15 - 25 years from date of manufacture	Scrap value at end of useful life
Vehicles	5 - 7 years from date of manufacture	Scrap value at end of useful life
Furniture and fixtures	3 - 6 years from date of purchase	None
Computer hardware and software	2 - 5 years from date of purchase	None
Construction in progress	N/A	N/A

Major improvements and modifications incurred in connection with the acquisition of property, plant and equipment and leasing equipment that are required to get the asset ready for initial service are capitalized and depreciated over the remaining life of the asset. Project costs of major additions and betterments, including capitalizable engineering costs and other costs directly related to the development or construction of project, are capitalized and depreciation commences once it is placed into service. Interest costs directly related to and incurred during the construction period of property, plant and equipment are capitalized. Significant spare parts are depreciated in conjunction with the underlying property, plant and equipment asset when placed in service.

We review our depreciation policies on a regular basis to determine whether changes have taken place that would suggest that a change in our depreciation policies, useful lives of our equipment or the assigned residual values is warranted.

Capitalized Interest—The interest cost associated with major development and construction projects is capitalized and included in the cost of the project. Interest capitalization ceases once a project is substantially complete or no longer undergoing construction activities to prepare it for its intended use. We capitalized interest of $1.4 million and $2.1 million during the three months ended March 31, 2023 and 2022, respectively.

Repairs and Maintenance—Repair and maintenance costs that do not extend the lives of the assets are expensed as incurred. Our repairs and maintenance expenses were $4.3 million and $1.3 million during the three months ended March 31, 2023 and 2022, respectively, and are included in Operating expenses in the Consolidated and Combined Consolidated Statements of Operations.

Impairment of Long-Lived Assets—We perform a recoverability assessment of each of our long-lived assets whenever events or changes in circumstances, or indicators, indicate that the carrying amount or net book value of an asset may not be recoverable. Indicators may include, but are not limited to, a significant change in market conditions; or the introduction of newer technology. When performing a recoverability assessment, we measure whether the estimated future undiscounted net cash flows expected to be generated by the asset exceeds its net book value. The undiscounted cash flows consist of cash flows from terminal services contracts and currently contracted leases, future projected leases, terminal service and freight rail rates,

FTAI INFRASTRUCTURE INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

transition costs, and estimated residual or scrap values. In the event that an asset does not meet the recoverability test, the carrying value of the asset will be adjusted to fair value resulting in an impairment charge.

Management develops the assumptions used in the recoverability analysis based on its knowledge of active contracts, current and future expectations of the demand for a particular asset and historical experience, as well as information received from third party industry sources. The factors considered in estimating the undiscounted cash flows are impacted by changes in future periods due to changes in contracted lease rates, terminal service, and freight rail rates, residual values, economic conditions, technology, demand for a particular asset type and other factors.

Other Current Assets—Other current assets is primarily comprised of commodities inventory of $0.9 million and $3.6 million, deposits of $21.6 million and $22.8 million, note receivable of $20.0 million and $20.0 million, prepaid expenses of $10.9 million and $16.4 million, and other assets of $5.5 million and $4.5 million as of March 31, 2023 and December 31, 2022, respectively.

Other Assets—Other Assets primarily consists of a note receivable of $10.8 million as of both March 31, 2023 and December 31, 2022 from CarbonFree, a business that develops technologies to capture carbon dioxide from industrial emissions sources.

Accounts Payable and Accrued Liabilities—Accounts payable and accrued liabilities primarily include payables relating to construction projects, interline payables to other railroads, accrued compensation, interest and payables to Manager.

Other Current Liabilities—Other current liabilities primarily include environmental liabilities of $4.1 million and $4.1 million, and insurance premium liabilities of $4.1 million and $6.2 million as of March 31, 2023 and December 31, 2022, respectively.

Goodwill—Goodwill includes the excess of the purchase price over the fair value of the net tangible and intangible assets associated with the acquisition of Jefferson Terminal, Transtar and FYX. The carrying amount of goodwill within the Jefferson Terminal, Railroad and Corporate and Other segments was $122.7 million, $132.1 million, and $5.4 million as of both March 31, 2023 and December 31, 2022, respectively.

We review the carrying values of goodwill at least annually to assess impairment since these assets are not amortized. An annual impairment review is conducted as of October 1st of each year. Additionally, we review the carrying value of goodwill whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The determination of fair value involves significant management judgment.

For an annual goodwill impairment assessment, an optional qualitative analysis may be performed. If the option is not elected or if it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then a goodwill impairment test is performed to identify potential goodwill impairment and measure an impairment loss.

A goodwill impairment assessment compares the fair value of a respective reporting unit with its carrying amount, including goodwill. The estimate of fair value of the respective reporting unit is based on the best information available as of the date of assessment, which primarily incorporates certain factors including our assumptions about operating results, business plans, income projections, anticipated future cash flows and market data. If the estimated fair value of the reporting unit is less than the carrying amount, a goodwill impairment is recorded to the extent that the carrying value of the reporting unit exceeds the fair value.

As of October 1, 2022, for our Jefferson Terminal reporting unit, we completed a quantitative analysis. We estimate the fair value of Jefferson Terminal using an income approach, specifically a discounted cash flow analysis. This analysis requires us to make significant assumptions and estimates about the forecasted revenue growth rates, EBITDA margins and discount rates. The estimates and assumptions used consider historical performance if indicative of future performance and are consistent with the assumptions used in determining future profit plans for the reporting units.

In connection with our impairment analysis, although we believe the estimates of fair value are reasonable, the determination of certain valuation inputs is subject to management's judgment. Changes in these inputs, including as a result of events beyond our control, could materially affect the results of the impairment review. If the forecasted cash flows or other key inputs are negatively revised in the future, the estimated fair value of the reporting unit could be adversely impacted, potentially leading to an impairment in the future that could materially affect our operating results. The Jefferson Terminal reporting unit had an estimated fair value that exceeded its carrying value by more than 10% but less than 20% as of October 1, 2022. The Jefferson Terminal reporting unit forecasted revenue is dependent on the ramp up of volumes under current and expected future contracts for storage and throughput of heavy and light crude and refined products, expansion of refined product distribution to Mexico and movements in future oil spreads. At October 1, 2022, approximately 4.3 million barrels of storage was operational with 1.9 million barrels under construction for new contracts that came online in December 2022 and completed our storage development for our main terminal. Our discount rate for our 2022 goodwill impairment analysis was 9.5% and our assumed terminal growth rate was 2.0%. If our strategy changes from planned capacity downward due to an inability to source contracts or expand volumes, the fair value of the reporting unit would be negatively affected, which could lead to an impairment. The expansion of refineries in the Beaumont/Port Arthur area, as well as growing crude oil production in the U.S. and Canada, are expected to result in increased demand for storage on the U.S. Gulf Coast. Although we do not have significant direct exposure to volatility of crude oil prices, changes in crude oil pricing that affect long term refining planned output could impact Jefferson Terminal operations.

FTAI INFRASTRUCTURE INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

We expect the Jefferson Terminal reporting unit to continue to generate positive Adjusted EBITDA in future years. In December 2022, our multi-year refined products contract with Exxon Mobil Oil Corporation commenced. Although certain of our anticipated contracts or expected volumes from existing contracts for Jefferson Terminal have been delayed, we continue to believe our projections are achievable. Further delays in executing anticipated contracts or achieving our projected volumes could adversely affect the fair value of the reporting unit.

There were no impairments of goodwill for the three months ended March 31, 2023 and 2022.

Intangibles and Amortization—Intangible assets include the value of existing customer relationships acquired in connection with the acquisition of Jefferson Terminal and Transtar.

Customer relationship intangible assets are amortized on a straight-line basis over their useful lives as the pattern in which the asset’s economic benefits are consumed cannot reliably be determined. Customer relationship intangible assets have useful lives ranging from 5 to 15 years, no estimated residual value, and amortization is recorded as a component of Depreciation and amortization in the Consolidated and Combined Consolidated Statements of Operations. The weighted-average remaining amortization period for customer relationships was 147 months and 148 months as of March 31, 2023 and December 31, 2022, respectively.

Redeemable Preferred Stock—We classify the Series A Senior Preferred Stock ("Redeemable Preferred Stock") as temporary equity in the Consolidated Balance Sheets due to certain contingent redemption clauses that are at the election of the holders. The carrying value of the Redeemable Preferred Stock is accreted to the redemption value at the earliest redemption date, which has been determined to be August 1, 2030. We use the interest method to accrete to the redemption value.

Deferred Financing Costs—Costs incurred in connection with obtaining long-term financing are capitalized and amortized to interest expense over the term of the underlying loans. Unamortized deferred financing costs of $29.5 million and $30.9 million as of March 31, 2023 and December 31, 2022, respectively, are included in Debt, net in the Consolidated Balance Sheets.

Amortization expense was $1.4 million and $0.8 million for the three months ended March 31, 2023 and 2022, respectively, and is included in Interest expense in the Consolidated and Combined Consolidated Statements of Operations.

Terminal Services Revenues—Terminal services are provided to customers for the receipt and redelivery of various commodities. These revenues relate to performance obligations that are recognized over time using the right to invoice practical expedient, i.e., invoiced as the services are rendered and the customer simultaneously receives and consumes the benefit over the contract term. The Company’s performance of service and right to invoice corresponds with the value delivered to our customers. Revenues are typically invoiced and paid on a monthly basis.

Rail Revenues—Rail revenues generally consist of the following performance obligations: industrial switching, interline services, demurrage and storage. Switching revenues are derived from the performance of switching services, which involve the movement of cars from one point to another within the limits of an individual plant, industrial area, or a rail yard. Switching revenues are recognized as the services are performed, and the services are generally completed on the same day they are initiated.

Interline revenues are derived from transportation services for railcars that originate or terminate at our railroads and involve one or more other carriers. For interline traffic, one railroad typically invoices a customer on behalf of all railroads participating in the route directed by the customer. The invoicing railroad then pays the other railroads its portion of the total amount invoiced on a monthly basis. We record revenue related to interline traffic for transportation service segments provided by carriers along railroads that are not owned or controlled by us on a net basis. Interline revenues are recognized as the transportation movements occur.

Our ancillary services revenue primarily relates to demurrage and storage services. Demurrage represents charges assessed by railroads for the detention of cars by shippers or receivers of freight beyond a specified free time and is recognized on a per day basis. Storage services revenue is earned for the provision of storage of shippers’ railcars and is generally recognized on a per day, per car basis, as the storage services are provided.

Lease Income—Lease income consists of rental income from tenants for storage space. Lease income is recognized on a straight-line basis over the terms of the relevant lease agreement.

Roadside Services Revenues—Roadside services revenue is revenue related to providing roadside assistance services to customers in the intermodal and over-the-road trucking industries. Revenue is recognized when a performance obligation is satisfied by completing a repair service at a point in time. Revenues are typically invoiced for each repair and generally have 30-day payment terms.

FTAI INFRASTRUCTURE INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

Other Revenue—Other revenue primarily consists of revenue related to the handling, storage and sale of raw materials. Revenues for the handling and storage of raw materials relate to performance obligations that are recognized over time using the right to invoice practical expedient, i.e., invoiced as the services are rendered and the customer simultaneously receives and consumes the benefit over the contract term. Our performance of service and right to invoice corresponds with the value delivered to our customers. Revenues for the sale of raw materials relate to contracts that contain performance obligations to deliver the product over the term of the contract. The revenues are recognized when the control of the product is transferred to the customer, based on the volume delivered and the price within the contract. Other revenues are typically invoiced and paid on a monthly basis.

Additionally, other revenue includes revenue related to derivative trading activities.

Payment terms for revenues are generally short term in nature.

Leasing Arrangements—At contract inception, we evaluate whether an arrangement is or contains a lease for which we are the lessee (that is, arrangements which provide us with the right to control a physical asset for a period of time). Operating lease right-of-use (“ROU”) assets and lease liabilities are recognized in Operating lease right-of-use assets, net and Operating lease liabilities within current liabilities and non-current liabilities in our Consolidated Balance Sheets, respectively. Finance lease ROU assets are recognized in Property, plant and equipment, net and lease liabilities are recognized in Other current liabilities and Other liabilities in our Consolidated Balance Sheets.

All lease liabilities are measured at the present value of the unpaid lease payments, discounted using our incremental borrowing rate based on the information available at commencement date of the lease. ROU assets, for both operating and finance leases, are initially measured based on the lease liability, adjusted for prepaid rent and lease incentives. ROU assets are subsequently measured at the carrying amount of the lease liability adjusted for prepaid or accrued lease payments and lease incentives. The finance lease ROU assets are subsequently amortized using the straight-line method.

Operating lease expenses are recognized on a straight-line basis over the lease term. With respect to finance leases, amortization of the ROU asset is presented separately from interest expense related to the finance lease liability. Variable lease payments, which are primarily based on usage, are recognized when the associated activity occurs.

We have elected to combine lease and non-lease components for all lease contracts where we are the lessee. Additionally, for arrangements with lease terms of 12 months or less, we do not recognize ROU assets and lease liabilities; lease payments are recognized on a straight-line basis over the lease term with variable lease payments recognized in the period in which the obligation is incurred.

Concentration of Credit Risk—We are subject to concentrations of credit risk with respect to amounts due from customers. We attempt to limit our credit risk by performing ongoing credit evaluations. During the three months ended March 31, 2023, one customer in the Railroad segment accounted for approximately 48% of total revenue. Additionally, we earned approximately 12% of our revenue for the three months ended March 31, 2023 from one customer in the Jefferson Terminal segment. For the three months ended March 31, 2022, we earned 70% and 12% of our revenues from one customer in the Railroad segment and one customer in the Jefferson Terminal segment, respectively.

As of March 31, 2023 accounts receivable from three customers from the Jefferson Terminal and Railroad segments represented 50% of total accounts receivable, net. As of December 31, 2022, accounts receivable from three customers from the Jefferson Terminal and Railroad segments represented 55% of total accounts receivable, net.

We maintain cash and restricted cash balances, which generally exceed federally insured limits, and subject us to credit risk, in high credit quality financial institutions. We monitor the financial condition of these institutions and have not experienced any losses associated with these accounts.

Allowance for Doubtful Accounts—We determine the allowance for doubtful accounts based on our assessment of the collectability of our receivables on a customer-by-customer basis. We also consider current and future economic conditions over the expected lives of the receivables, the amount of receivables in dispute, and the current receivables aging.

Expense Recognition—Expenses are recognized on an accrual basis as incurred.

Acquisition and Transaction expenses—Acquisition and transaction expense is comprised of costs related to business combinations, dispositions and terminated deal costs related to asset acquisitions, including advisory, legal, accounting, valuation and other professional or consulting fees.

Comprehensive Income (Loss)—Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances, excluding those resulting from investments by and distributions to owners. Our comprehensive income (loss) represents net loss, as presented in the Consolidated and Combined Consolidated Statements of Operations, adjusted for fair value changes recorded in other comprehensive income (loss) related to cash flow hedges of our equity method investees and pension and other employee benefit accounts.

FTAI INFRASTRUCTURE INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

Derivative Financial Instruments

Electricity Derivatives—Our equity method investee, Long Ridge, enters into derivative contracts as part of a risk management program to mitigate price risk associated with certain electricity price exposures. Long Ridge primarily uses swap derivative contracts, which are agreements to buy or sell a quantity of electricity at a predetermined future date and at a predetermined price.

Cash Flow Hedges

Certain of these derivative instruments are designated and qualify as cash flow hedges. Our share of the derivative's gain or loss is reported as Other comprehensive income (loss) related to equity method investees, net in our Consolidated and Combined Consolidated Statements of Comprehensive Income (Loss) and recorded in Accumulated other comprehensive loss in our Consolidated Balance Sheets. The change in our equity method investment balance related to derivative gains or losses on cash flow hedges is disclosed as a Non-cash change in equity method investment in our Consolidated and Combined Consolidated Statements of Cash Flows.

Derivatives Not Designated As Hedging Instruments

Certain of these derivative instruments are not designated as hedging instruments for accounting purposes. Our share of the change in fair value of these contracts is recognized in Equity in earnings (losses) of unconsolidated entities in the Consolidated and Combined Consolidated Statements of Operations. The cash flow impact of derivative contracts that are not designated as hedging instruments is recognized in Equity in earnings (losses) of unconsolidated entities in our Consolidated and Combined Consolidated Statements of Cash Flows.

Income Taxes—Prior to the spin-off, we were taxed as a disregarded entity for U.S. federal income tax purposes and our taxable income or loss generated was allocated to investors by our Former Parent, which was treated as a partnership for U.S. federal income tax purposes. In addition, certain of our subsidiaries were taxed as separate corporations for U.S. federal income tax purposes. The income tax provision included in the consolidated and combined consolidated financial statements prior to the spin-off was prepared on a separate return method. Post spin-off, FTAI Infrastructure’s tax structure, certain return elections and assertions are different, including a single consolidated federal tax filing in the U.S., and therefore the income taxes presented prior to the spin-off in the consolidated and combined consolidated financial statements are not expected to be indicative of the Company’s future income taxes.

We account for these taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is established when management believes it is more likely than not that a deferred tax asset will not be realized.

Some of our entities file income tax returns in the U.S. federal jurisdiction, various state jurisdictions and in certain foreign jurisdictions. The income tax returns filed by us and our subsidiaries are subject to examination by the U.S. federal, state and foreign tax authorities. We recognize tax benefits for uncertain tax positions only if it is more likely than not that the position is sustainable based on its technical merits. Interest and penalties on uncertain tax positions are included as a component of the provision for income taxes in the Consolidated and Combined Consolidated Statements of Operations.

Pension and Other Postretirement Benefits—We have obligations for a pension and a postretirement benefit plan in connection with the acquisition of Transtar for certain eligible Transtar employees. The pension and other postretirement obligations and the related net periodic costs are based on, among other things, assumptions regarding the discount rate, salary increases, the projected mortality of participants and the current level and future escalation of health care costs. Actuarial gains and losses occur when actual experience differs from any of the many assumptions used to value the benefit plans, or when assumptions change. We will recognize into income on an annual basis a portion of unrecognized actuarial net gains or losses that exceed 10 percent of the greater of the projected benefit obligations or the market-related value of plan assets (the corridor). This excess is amortized over the average remaining service period of active employees expected to receive benefits under the plan. Refer to Note 11 for additional discussion on the pension and postretirement benefit plans.

3. LEASING EQUIPMENT, NET

Leasing equipment, net is summarized as follows:




	March 31, 2023		December 31, 2022
Leasing equipment	$	44,179	$	44,179
Less: Accumulated depreciation	(9,548)		(9,272)
Leasing equipment, net	$	34,631	$	34,907

Depreciation expense for leasing equipment is summarized as follows:

FTAI INFRASTRUCTURE INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)


	Three Months Ended March 31,
	2023		2022
Depreciation expense for leasing equipment	$	276	$	276

4. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net is summarized as follows:




	March 31, 2023		December 31, 2022
Land, site improvements and rights	$	183,526	$	183,640
Construction in progress	145,544		127,941
Buildings and improvements	19,356		19,356
Bridges and Tunnels	173,868		173,868
Terminal machinery and equipment	1,152,592		1,141,505

Track and track related assets	100,068		100,068
Railroad equipment	9,007		8,463
Railcars and locomotives	99,983		100,200
Computer hardware and software	12,118		11,733
Furniture and fixtures	1,793		1,745
Other	11,407		11,336
	1,909,262		1,879,855
Less: Accumulated depreciation	(224,020)		(206,047)
Property, plant and equipment, net	$	1,685,242	$	1,673,808

During the three months ended March 31, 2023, we added property, plant and equipment of $29.4 million, which primarily consisted of terminal machinery and equipment placed in service or under development at Jefferson Terminal and Repauno.

Depreciation expense for property, plant and equipment is summarized as follows:


	Three Months Ended March 31,
	2023		2022

Depreciation expense	$	17,973	$	14,845

5. INVESTMENTS

The following table presents the ownership interests and carrying values of our investments:


			Carrying Value
	Investment	Ownership Percentage	March 31, 2023		December 31, 2022
Intermodal Finance I, Ltd.	Equity method	51%	$	—	$	—
Long Ridge Energy & Power LLC (1)	Equity method	50%	—		—

GM-FTAI Holdco LLC	Equity method	See below	65,684		68,025
Clean Planet Energy USA LLC	Equity method	50%	6,636		5,564
			$	72,320	$	73,589

________________________________________________________

(1) The carrying value of $104.8 million and $187.2 million as of March 31, 2023 and December 31, 2022 is included in Other liabilities in the Consolidated Balance Sheets.

We did not recognize any other-than-temporary impairments for the three months ended March 31, 2023 and 2022.

FTAI INFRASTRUCTURE INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

The following table presents our proportionate share of equity in income (losses):


	Three Months Ended March 31,
	2023		2022
Intermodal Finance I, Ltd.	$	21	$	43
Long Ridge Energy & Power LLC	7,761		(21,381)

GM-FTAI Holdco LLC	(2,341)		(433)
Clean Planet Energy USA LLC	(1,075)		(272)
Total	$	4,366	$	(22,043)

Equity Method Investments

Intermodal Finance I, Ltd.

In 2012, we acquired a 51% non-controlling interest in Intermodal Finance I, Ltd. (“Intermodal”). Intermodal is governed by a board of directors, and its shareholders have voting rights through their equity interests. As such, Intermodal is not within the scope of ASC 810-20 and should be evaluated for consolidation under the voting interest model. Due to the existence of substantive participating rights of the 49% equity investor, including the joint approval of material operating and capital decisions, such as material contracts and capital expenditures consistent with ASC 810-10-25-11, we do not have unilateral rights over this investment and, therefore, we do not consolidate Intermodal but account for this investment in accordance with the equity method. We do not have a variable interest in this investment as none of the criteria of ASC 810-10-15-14 were met.

As of March 31, 2023, Intermodal owns a portfolio of approximately 239 shipping containers subject to multiple operating leases.

Long Ridge Energy & Power LLC

In December 2019, Ohio River Shareholder LLC (“ORP”), a wholly owned subsidiary, contributed its equity interests in Long Ridge into Long Ridge Energy & Power LLC and sold a 49.9% interest (the “Long Ridge Transaction”) for $150 million in cash, plus an earn out. We no longer have a controlling interest in Long Ridge but still maintain significant influence through our retained interest and, therefore, now account for this investment in accordance with the equity method. Following the sale, we deconsolidated ORP, which held the assets of Long Ridge.

In addition to our equity method investment, in October 2022 we entered into a shareholder loan agreement maturing on October 15, 2023 and accruing paid-in-kind (“PIK”) interest at a 13% rate. The Company made an additional $20.5 million of investment in Long Ridge as part of the shareholder loan agreement in Q1 2023. As of March 31, 2023, the balance of the note receivable was $49.2 million recorded as part of the Long Ridge investment in Other liabilities on the Consolidated Balance Sheet.

FTAI INFRASTRUCTURE INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

The tables below present summarized financial information for Long Ridge Energy & Power LLC:


	(Unaudited)
	March 31, 2023		December 31, 2022
Balance Sheet
Assets
Current assets:
Cash and cash equivalents	$	2,349	$	2,192
Restricted cash	28,237		20,732
Accounts receivable	9,575		31,727
Other current assets	4,418		5,732
Total current assets	44,579		60,383
Property plant & equipment	834,903		827,886
Intangible assets	4,465		4,560
Goodwill	86,460		86,460
Other assets	8,346		8,540
Total assets	$	978,753	$	987,829

Liabilities
Current liabilities:
Accounts payable and accrued liabilities	$	65,232	$	87,498
Debt, net	60,446		38,526
Derivative liabilities	54,031		125,134
Other current liabilities	860		913
Total current liabilities	180,569		252,071
Debt, net	598,387		599,499
Derivative liabilities	500,957		557,708
Other liabilities	6,238		6,932
Total liabilities	1,286,151		1,416,210

Equity
Shareholders' equity	(168,105)		(273,597)
Accumulated deficit	(139,293)		(154,784)
Total equity	(307,398)		(428,381)
Total liabilities and equity	$	978,753	$	987,829


	Three Months Ended March 31,
Income Statement	2023		2022

Total revenue	$	56,405	$	24,411

Expenses

Operating expenses	13,214		12,448


Depreciation and amortization	13,364		12,544
Interest expense	14,440		12,861
Total expenses	41,018		37,853
Total other income (expense)	105		(29,234)


Net income (loss)	$	15,492	$	(42,676)

FTAI INFRASTRUCTURE INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

GM-FTAI Holdco LLC

In September 2021, we acquired 1% of the Class A shares and 50% of the Class B shares of GM-FTAI Holdco LLC for $52.5 million. GM-FTAI Holdco LLC owns 100% interest in Gladieux Metals Recycling (“GMR”) and Aleon Renewable Metals LLC (“Aleon”). GMR specializes in recycling spent catalyst produced in the petroleum refining industry.

Aleon plans to develop a lithium-ion battery recycling business across the United States. Each planned location will collect, discharge and disassemble lithium-ion batteries to extract various metals in high-purity form for resale into the lithium-ion battery production market. Aleon and GMR are governed by separate boards of directors. Our ownership of Class A and B shares in GM-FTAI Holdco LLC provides us with 1% and 50% economic interest in GMR and Aleon, respectively. We account for our investment in GM-FTAI Holdco LLC as an equity method investment as we have significant influence through our ownership of Class A and Class B shares of GM-FTAI Holdco LLC.

On June 15, 2022, we exchanged our Class B shares which gave us economic interest in Aleon for an additional 20% interest in Class A shares. In addition, we also terminated our credit agreements with GMR and Aleon in exchange for an approximate 8.5% of additional interest in Class A shares. As a result of these exchange transactions, we own approximately 27% of GM-FTAI Holdco LLC, which owns 100% of both GMR and Aleon.

Clean Planet Energy USA LLC

In November 2021, we acquired 50% of the Class A shares of Clean Planet Energy USA LLC (“Clean Planet” or “CPE”) with an initial investment of $1.0 million. CPE intends on building waste plastic-to-fuel plants in the United States. The plants will convert various grades of non-recyclable waste plastic to renewable diesel in the form of jet fuel, diesel, naphtha, and low sulfur fuel oil. We account for our investment in CPE as an equity method investment as we have significant influence through our ownership of Class A shares.

Equity Investments

FYX Trust Holdco LLC

In July 2020, we invested $1.3 million for a 14% interest in an operating company that provides roadside assistance services for the intermodal and over-the-road trucking industries. FYX Trust Holdco LLC (“FYX”) has developed a mobile and web-based application that connects fleet managers, owner-operators, and drivers with repair vendors to efficiently and reliably quote, dispatch, monitor, and bill roadside repair services.

In May 2022, we purchased an additional 51% interest in FYX from an unrelated third party for a purchase price of $4.6 million, which resulted in our ownership of a majority stake in the entity.

In March 2023, we purchased the remaining non-controlling interest of FYX from an affiliate of our Manager for a purchase price of $4.4 million. This resulted in 100% ownership in FYX and the elimination of any non-controlling interest.

From the initial consolidation date in May 2022 through and as of March 31, 2023, FYX is presented on a consolidated basis in the Consolidated and Combined Consolidated Statements of Operations and the Consolidated Balance Sheets.

6. INTANGIBLE ASSETS, NET

Intangible assets, net are summarized as follows:


	March 31, 2023
	Jefferson Terminal		Railroad		Total
Intangible assets

Customer relationships	$	35,513	$	60,000	$	95,513
Less: Accumulated amortization	(30,480)		(6,724)		(37,204)
Intangible assets, net	$	5,033	$	53,276	$	58,309


	December 31, 2022
	Jefferson Terminal		Railroad		Total
Intangible assets

Customer relationships	$	35,513	$	60,000	$	95,513
Less: Accumulated amortization	(