Teleconferência de Resultados do 3T 2026 da FTAI Infrastructure (FIP): Resultados Ferroviários Recordes e Desalavancagem

Principais Destaques

• A FTAI Infrastructure (FIP) reportou um EBITDA ajustado recorde no 3T 2026 de US$ 95,3 milhões, uma alta de 34,4% em relação aos US$ 70,9 milhões no 3T 2025. Excluindo a Long Ridge, o EBITDA ajustado atingiu o recorde trimestral de US$ 54,4 milhões.
• O segmento ferroviário estabeleceu recordes em volume de vagões carregados, tarifa média por vagão, receita e EBITDA. A receita cresceu 68,9% na comparação anual, para US$ 104,2 milhões, enquanto o EBITDA ajustado avançou 62,9%, para US$ 47,4 milhões.
• A administração espera que a venda da Long Ridge seja concluída até o final de novembro. Espera-se que os recursos brutos de pouco mais de US$ 1,5 bilhão eliminem aproximadamente US$ 1,4 bilhão em dívidas e reduzam o serviço anual da dívida no nível da controladora em cerca de US$ 25 milhões.
• Espera-se que os ativos do USD Group contribuam com aproximadamente US$ 50 milhões de EBITDA anual nos volumes mínimos contratados. A administração prevê que o negócio combinado de Jefferson supere US$ 100 milhões em EBITDA anual antes do aumento da utilização da capacidade e das economias com a integração.
• A administração projeta a continuidade do crescimento de dois dígitos na receita ferroviária em 2027, com o EBITDA devendo crescer em ritmo um pouco mais acelerado, sustentado por maiores volumes, preços e economias geradas pela integração da Wheeling.
• A construção da Fase II de Repauno está próxima da conclusão. Com base nas negociações atuais com clientes, a administração espera que as operações comerciais tenham início em 2027, próximas ou na capacidade máxima.

Principais Dados Financeiros

Desempenho Operacional e dos Negócios

Ferroviário

O desempenho ferroviário foi sustentado por fortes volumes e preços. Os volumes da Gary Railway foram temporariamente afetados pela reforma do maior alto-forno de Gary Works, mas o projeto foi concluído em setembro e o alto-forno retornou à capacidade total.

A administração afirmou que os volumes de propano ficaram em níveis recordes ou próximos disso, enquanto os preços do setor permaneceram favoráveis. A empresa espera um crescimento de preços de pelo menos um dígito médio, com alguns contratos alcançando aumentos de um dígito alto em 2027.

A integração da Wheeling está praticamente concluída. A administração projeta cerca de US$ 19 milhões em economias anuais de custos, decorrentes principalmente de cortes de pessoal, compras e menores despesas gerais, com o benefício integral esperado a partir de 1º de janeiro.

A Nippon Steel comprometeu aproximadamente US$ 11 bilhões em investimentos em Gary e no complexo de Mon Valley. Seu investimento de cerca de US$ 3 bilhões em Mon Valley visa aumentar a capacidade de produção de aproximadamente 2,2 milhões de toneladas para 3,5 milhões de toneladas por ano. A administração estimou que isso poderá eventualmente adicionar de 30.000 a 50.000 vagões carregados e cerca de US$ 20 milhões em EBITDA incremental, embora os benefícios devam se materializar ao longo de vários anos.

Terminal Jefferson

O negócio de produtos refinados de Jefferson atingiu recordes trimestrais tanto em volumes quanto em receita. A atividade de petróleo bruto foi mais fraca durante o 2T e o 3T devido à redução nos embarques recebidos ligada à volatilidade no Oriente Médio, mas os volumes de outubro se recuperaram para 85.000 barris por dia, ante uma média de 41.000 barris por dia no 3T.

A empresa finalizou os termos comerciais com dois novos clientes de petróleo bruto. Os contratos estão programados para começar em 1º de janeiro e devem, segundo a administração, gerar aproximadamente US$ 8 milhões em EBITDA anual incremental.

A FTAI Infrastructure espera concluir a aquisição dos ativos do USD Group por volta da semana de 16 de novembro. Os ativos movimentam aproximadamente 50.000 barris por dia de petróleo bruto canadense sob um contrato take-or-pay de longo prazo com um cliente com classificação de grau de investimento e geram cerca de US$ 50 milhões em EBITDA anual nos volumes mínimos contratados.

A administração planeja integrar os ativos à Jefferson, buscar redução de custos e posicionar o negócio combinado de terminais para uma potencial venda em 2027.

Repauno

A construção da Fase II avança em direção à conclusão, incluindo um novo tanque criogênico e conexões associadas às plataformas ferroviárias e ao cais de atracação. A empresa também está convertendo uma caverna existente de butano para operação com propano, visando iniciar a movimentação de propano antes do comissionamento completo da Fase II.

Contratos de longo prazo cobrem parte da capacidade disponível. A administração afirmou que a demanda pelo espaço restante é alta e espera que as operações comerciais da unidade tenham início em 2027, próximas ou na capacidade máxima. A empresa pode buscar uma monetização após o fluxo de caixa se tornar visível.

Projeções da Administração

• A administração espera a continuidade do crescimento de dois dígitos na receita ferroviária em 2027 na comparação anual, com o crescimento do EBITDA sendo um pouco superior.
• Espera-se que as tarifas ferroviárias subam pelo menos um dígito médio, com aumentos de um dígito alto em alguns casos.
• A expectativa é que a venda da Long Ridge seja concluída até o final de novembro, sujeita à finalização da transação após aprovação regulatória.
• O EBITDA anual combinado de Jefferson deve superar US$ 100 milhões após a aquisição da USD, antes de uma maior utilização no terminal principal e de potenciais economias com a integração.
• Os dois novos contratos de petróleo bruto de Jefferson devem adicionar aproximadamente US$ 8 milhões em EBITDA anual a partir de 1º de janeiro.
• A receita da Fase II de Repauno deve ter início em 2027, potencialmente próxima ou na capacidade total com base nas negociações comerciais atuais.

Riscos e Pontos de Atenção

• O negócio de recebimento de petróleo bruto de Jefferson permanece exposto à volatilidade nos fluxos de oferta do Oriente Médio. A administração descreveu a recuperação como irregular e afirmou que a visibilidade sobre a chegada de navios continua limitada.
• Os benefícios esperados da aquisição da USD dependem da conclusão da transação, da integração bem-sucedida, da celebração de contratos adicionais e da captura de economias de custos.
• As perspectivas de Repauno dependem da conclusão da construção e do comissionamento da Fase II, bem como da contratação da capacidade remanescente.
• O cronograma e a magnitude dos volumes ferroviários adicionais decorrentes dos investimentos da Nippon Steel permanecem incertos, uma vez que os projetos serão implementados ao longo de vários anos.
• Potenciais vendas de Jefferson e Repauno continuam sendo objetivos estratégicos, e não transações concluídas.

Destaques da Sessão de Perguntas e Respostas com Analistas

A administração atribuiu a aceleração no crescimento do EBITDA ferroviário a uma combinação ampla de maiores volumes de vagões, forte demanda por propano, retorno da capacidade de Gary Works e preços favoráveis, em vez de um único fator. Ela descreveu o perfil de crescimento como sustentável para 2027.

Sobre M&A ferroviário, a administração caracterizou o mercado atual como um dos mais ativos em 10 a 20 anos. A FTAI Infrastructure está priorizando ativos estratégicos de maior porte, incluindo carve-outs corporativos e ativos detidos por fundos de private equity próximos do vencimento.

Em relação à Jefferson, a administração afirmou que a aquisição da USD deve melhorar significativamente o fluxo de caixa excedente e ampliar a base de clientes e produtos do terminal. A empresa acredita que a plataforma combinada estará melhor posicionada para uma potencial venda em 2027.

A administração afirmou que o índice operacional (operating ratio) ferroviário pode, eventualmente, migrar da faixa média de 70% para a faixa de 60%, embora isso vá levar tempo. Ela enfatizou a conversão de caixa em detrimento do índice operacional, destacando que o Capex ferroviário é de aproximadamente 15% do EBITDA, deixando cerca de 85% disponível para reinvestimento ou distribuição.

Transcrição Completa da Teleconferência de Resultados

Transcrição completa da teleconferência de resultados

Comentários da administração

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Third Quarter 2026 FTAI Infrastructure Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would like now to turn the conference over to Alan Andreini, Investor Relations. Please go ahead.

Alan Andreini

Thank you, Michelle. I would like to welcome you all to the FTAI Infrastructure Earnings Call for the third quarter of '26 joining me here today are Ken Nicholson, the CEO of FDI Infrastructure; Buck Fletcher, the company's CFO, and John Carnes, CEO of New Wheeling, our freight rail business. We have posted an investor presentation and our press release on our website, which we encourage you to download if you have not already done so. Also, please note that this call is open to the public in listen-only mode and is being webcast.

In addition, we will be discussing some non-GAAP financial measures during the call today, including adjusted EBITDA. The reconciliations of those measures to the most directly comparable GAAP measures can be found in the earnings supplement. Before I turn the call over to Ken, I would like to point out that certain statements made today will be forward-looking statements including regarding future earnings. These statements by their nature are uncertain and may differ materially from actual results. We encourage you to review the disclaimers in our press release and investor presentation regarding non-GAAP financial measures and forward-looking statements and to review the risk factors contained in our quarterly report filed with the SEC.

Now I would like to turn the call over to Ken.

Kenneth Nicholson

Okay. Thank you very much, Alan. Good morning, everyone, and welcome to the call. It's been a very active past few months at FTAI, and we are excited to provide updates on a number of important developments. We had a great quarter financially posting new records for revenue and EBITDA, led by continued growth at our railroad and walk you through the building blocks of all of that in just a bit here. But equally important, we advanced a handful of strategic priorities away from the railroad that should contribute to meaningful value creation in the quarters to come.

I'm going to kick things off on Slide 3 of the supplement. Our core business is the freight railroad and in Q3, we again posted record financial results. We're seeing a strong environment, both in terms of volumes and pricing and are optimistic about continued organic growth. Nippon Steel recently announced some additional investments at the Mon Valley facilities in Pittsburgh, and we'll see meaningful incremental volumes of propane shipments commencing next year. All in, we're forecasting continued double-digit growth in revenue and EBITDA in the year ahead.

In addition, we're experiencing a high level of M&A activity in the market, and we're actively evaluating several potential acquisition opportunities. I firmly believe that our business is one of the best positioned buyers in the market, especially as it relates to larger more strategic rail assets, and I'm excited about a number of near-term opportunities.

At our Long Ridge power and gas business, I'm thrilled to report that just this week, we finally received the regulatory approvals for the sale of the company. With approval in hand, we expect to close the sale by the end of this month. Gross proceeds of just over $1.5 billion will be used almost entirely to repay debt resulting in a material reduction in leverage and more importantly, lower interest expense at our parent level. With a lighter balance sheet, we plan to continue our focus on growing our core rail business.

And finally, we continue to position our terminals for monetization next year. Last month, we announced the acquisition of logistics assets from USD Group, which we plan to combine with Jefferson to transform the value proposition of that combined business. And at Repauno, our Phase II buildout is approaching completion and setting us up for an exciting 2027.

As we look ahead, our strategy is straightforward: continue to reduce leverage, grow the value of our rail platform materially increased EBITDA at Jefferson Repauno and ultimately monetize those terminal assets as we are doing with Longbridge.

I'm going to move to Slide 4, and we'll dig into the consolidated financial results for the quarter. Adjusted EBITDA for Q3 came in at $95.3 million, up materially from $70.9 million in the third quarter of 2025. On the right side of the slide, we illustrate our historical quarterly adjusted EBITDA, excluding the results of Long Ridge, given the pending sale. Excluding Longbridge, adjusted EBITDA was $54.4 million for Q3, another quarterly record. And in the quarters ahead, we expect EBITDA to continue to grow, driven by a handful of high confidence events.

First, organic growth at our railroad; second, the USD acquisition and the inclusion of USD's financial results with Jefferson going forward, and third, the commencement of Phase II operations at Ripon next year.

Flipping to Page 5. I'll talk briefly about our balance sheet and our deleveraging trajectory. With the long reach sale, we expect to eliminate approximately $1.4 billion of total debt from our balance sheet, of which a little over $1.1 billion is at the long ridge level and a little under $300 million is at other parent entities. Debt service at our parent level will decline by approximately $25 million per year, meaningfully improving our leverage metrics. And we expect our leverage profile to continue to improve over the next several quarters as we integrate the USD assets and bring online Phase II at Ripon.

I'm now going to walk through the more detailed financial performance at each of our segments, and we'll also talk about some recent developments and our priorities in the quarters ahead. We're going to start with our railroad on Slide 7. We posted new quarterly records across the board. Carloads, average rates per car, revenue and EBITDA all came in at all-time highs. Revenue was $104.2 million, and adjusted EBITDA was $47.4 million for the quarter, compared with Q3 2025 revenue of $61.7 million and adjusted EBITDA of $29.1 million.

We closed the acquisition of the Wheeling and Lake Gary railed in August of last year, so year-over-year comparisons are not entirely comparable. But even if we assumed we had owned the wheeling for the entirety of Q3 last year, all key metrics would be higher year-over-year. Volumes for the quarter were strong in all categories with the exception of slightly lower volumes at our Gary Railway as U.S. Steel continue to undertake a substantial overhaul and upgrade of the largest blast furnace at Gary Works, which was completed in September and is once again operating at full capacity.

Average rate per car reflected a strong pricing environment as well as higher fuel surcharges, which we pass along to our customers. Integration of the Wheeling and Lake area is largely complete with the final systems integration taking place here in November, so we should continue to see cost savings opportunities continuing into this fourth quarter.

We expect strong growth in our rail business continuing to 2027, and we highlight some of the drivers of that on Slide 8. Organically, the outlook for both volumes and rates is favorable, with shipments of energy products steel products and other raw materials, all strong and pricing also trending higher again next year. Nippon continues to roll out committed investments at U.S. Steel's Pittsburgh and Gary facilities that should drive incremental volumes in the years to come. And propane shipments originating in Ohio destined for our Repauno terminal will commence next year.

While the outlook for organic growth is favorable, we are equally excited about the M&A market and opportunities that we are evaluating. Our objective is not simply to add EBITDA. It is to build scale in a highly strategic portfolio of assets where we believe our operating capabilities and existing networks should make those assets more valuable under our ownership.

Now on to our Jefferson terminal. At Jefferson, we reported $24.9 million of revenue and $14.2 million of adjusted EBITDA in Q3 versus $21.1 million of revenue and $11 million of EBITDA in Q3 of last year. Refined products came in at a new quarterly record in terms of both volumes and revenues as our export business continues to grow. Fruit volumes continued to be impacted by volatility in the Middle East and the temporary reduction in inbound ship volumes. But we're encouraged to see inbound crude volumes recovering materially so far in Q4 with October crude volumes averaging 85,000 barrels per day, more than double the 41,000 barrels per day we averaged during Q3.

Based on our most current interactions with the refineries we serve, we forecast the remainder of Q4 to be strong on the crude front. We continue to negotiate new contracts to expand our business at Jefferson and have recently finalized commercial terms with two new customers for crude oil exports. The new business will commence on January 1, next year and should represent approximately $8 million of incremental annual EBITDA.

We also continue to discuss larger opportunities with existing customers that involve expansions of the services we currently provide with little to no CapEx. Our goal is to execute on all of these larger opportunities in the coming months. But as I mentioned, the majority of growth at Jefferson will be driven by the acquisition of the USD assets which we expect to be reflected in our Jefferson financials upon closing of that transaction in the middle of this month of November.

On Slide 10, we walk through the USD acquisition in more detail. The assets we're acquiring include a rail connected fruit terminal in the Bolon Port Arthur energy complex and a 50% joint venture interest in a diluent recovery unit in Alberta, Canada. Two assets formed the bookends of a supply chain that handles approximately 50,000 barrels per day of Canadian crude oil under a take-or-pay long-term contract with an investment-grade customer.

Crude oil originates in Canada, where low-value diluent, which is used in the initial recovery process is removed from the product to concentrate the oil into higher-value pure crude which is then shipped by rail to Beaumont and piped to the P66 crude oil hub. Altogether, at the contracted minimum volumes, the USD assets generate approximately $50 million of annual EBITDA. What is particularly attractive to us is both the quality and visibility of that EBITDA.

More importantly, the addition of the USD assets transforms our Jefferson business, and we talk through some of the highlights on Slide 11. We Jefferson's growth trajectory takes another leap forward with the addition of USD volumes and ultimately has the potential to drive meaningful value creation in advance of our plans to monetize Jefferson next year. The combined business will provide critical energy logistics services to a total of seven high-quality customers under long-term contracts. The resulting combined EBITDA is expected to exceed $100 million annually before including the impact of increased capacity utilization at Jefferson's main terminal.

We expect to execute these additional contracts in the near term, and we see opportunities also to realize cost savings from integrating the USD assets with Jefferson. Together, those initiatives provide meaningful upside to EBITDA in 2027 and importantly, should enhance the value of Jefferson as we position the business for sale next year.

And finally, turning to Repauno. Our focus continues on Phase II where construction proceeds as planned toward our goal of completing in the coming months and revenue commencing shortly thereafter. We have long-term contracts in place for a portion of our capacity and are seeing high demand for the remaining available space. Spreads for propane exports continue to be attractive. And based on the conversations we are having, we expect to commence revenue service in 2027 near or at full capacity.

Construction of Phase II is progressing well with the new progenic tank readying for completion as well as the pipes and manifolds, connecting the tank to our rail racks and ship dock. Here in Q4, we are converting our existing cavern previously utilized for butane handling to propane in order to start handling propane in advance of completion and commissioning of Phase II. Repauno is approaching an important inflection point. We have invested the capital, construction is nearing completion, and the focus is now shifting from development to cash flow generation. As that cash flow becomes visible in 2027, we believe the value of Repauno should be increasingly apparent and position us well for a potential monetization.

I will conclude our remarks there, and now let me turn the call back over to Alan.

Alan Andreini

Thank you, Ken. Michelle, you may now open the call to Q&A.

Operator

[Operator Instructions] First come from Julian Bologna with Compass Point.

Perguntas e respostas

Giuliano Anderes-Bologna

Congrats on successful great quarter. coming over to the rail side. It looks like the growth in EBITDA in the Rail segment is accelerating. Can you expand on that and what's driving that acceleration and how durable it is?

Kenneth Nicholson

Julian, thanks for the question. Yes, we're very happy with Q3 and the results, we certainly are seeing a very good start to Q4. So everything I mentioned, double-digit year-over-year growth in revenue and a little more than that in EBITDA is what we continue to expect. It really is not one specific thing. Which is great. It's a combination of many things. Carloads and the overall volume environment just continues to be strong. We're seeing propane volumes as high as I think we've ever seen them or certainly the wheeling has ever seen them. And it's great to have the business at Gary now back online for the entirety of Q4.

The largest blast furnace in Garidana was out of out of service for the bulk of Q3. So we're excited about that. Pricing in the rail industry continues to be attractive. We continue to see at least mid-single-digit pricing growth going forward. In some cases, pricing will be higher than that into the higher single digits next year. That's not in all cases, but in some cases. And so really, the growth is driven by revenue gains, and we're really happy with what we're seeing. And yes, I think it's very sustainable into 2027.

Giuliano Anderes-Bologna

That's very helpful. And then you mentioned the rail M&A environment is robust. Can you give us a little more color on what you're seeing and the types of opportunities you're looking at?

Kenneth Nicholson

Yes, definitely. I mean I do have to say, we've been invested in the rail sector here for quite some time, and we've seen the waves of M&A and consolidation. This is certainly one of the most active, if not the most active environments we've seen in -- I mean, at least 10 years, maybe 20 years. there's a lot going on, and it's driven by a number of various dynamics, big companies, smaller companies, all looking to sell -- you have -- the rail industry is a dynamic one.

You have lots of different types of companies with different ownership profiles. There are over 500 short line and regional railroads, in North America. So there's a big base of potential candidates for consolidation in a fragmented market. But you've got either individual owners who have owned their rail assets for significant periods of time, and they're just getting to a point where they're ready to sell and move on to their next challenge.

There was a big wave of M&A over the past five or 10 years, and a lot of private equity firms came into the sector and their funds, which typically have 10-year terms are coming up on maturities, and so they need to sell. And then we continue to look at some corporate carve-outs kind of like our acquisition of Transtar from USL particularly fondo those types of situations because I think we can be a very differentiated buyer given our experience U.S. Steel.

So it's super active looking at all different types of things. I do think our focus is going to be on the bigger opportunities. There are a handful of smaller things out there that don't quite move the needle for us. And I think our time and energy is probably better spent on some of the bigger, more strategic situations.

Operator

And the next question will come from Greg Lewis with BTIG.

Gregory Lewis

I was hoping to talk a little bit about Jefferson just following the acquisition. Could you talk about that impact on the acquisition and what that does for Jefferson, not only in terms of how you're thinking about integrating that and organically growing EBITDA. But maybe does this lead to a potential I don't know, strategic alternatives opportunity where this could be sold at some point in the future?

Kenneth Nicholson

Yes. Greg, thanks for the question. The answer is yes. I think the acquisition does a lot or Jefferson. First, outside of any strategic opportunities, it materially changes the cash flow profile of the business. Jefferson is an asset that's been bought over years and years, and the team down in Beaumont has done an exceptional job building out the infrastructure. I mean that is a gold-plated terminal and I really believe all of our customers are very happy with the performance down there.

But it has taken time, of course. There have been some frustrations in the amount of time that it has taken to ramp up. I really think we've done a phenomenal job, again, led by the core team down in Beaumont. Finally, getting to a point where cash flows exceed interest expense on the debt that was incurred to build out all that infrastructure. That infrastructure will live for the next 50 to 100 years, but it took a lot of capital, and we were able to borrow a fair amount of that capital to build out those infrastructure.

But it has left Jefferson relatively tight on a cash flow basis. This acquisition of USD completely transforms and changes the cash flow profile of the business. Jefferson will now be generating ample excess cash flow, and that just in and of itself is very important.

On the strategic front, I do think there is the 1 plus 1 equals 3 dynamic here. We added new high-quality pure investment-grade customer. We get access to new products, kind of akin to renovating your house before you sell it. And I'm looking forward to preparing the company for sale next year. Obviously, we're still going to execute somewhat. But look, I think the combined capital we have at the Jefferson and the purchase price of will certainly be less than the total proceeds we'll get from a sale and it's a very accretive transaction as we look to a potential monetization next year.

Operator

Our next question will come from Matthew Ortner with Jones.

Matthew Erdner

Congrats on a solid quarter. What impact at Jefferson has the crisis in the Middle East presented to you guys in terms of customers or potential contracts?

Kenneth Nicholson

Yes. As I mentioned in some of my comments, seems like that is recovering. But Q2 and Q3 at Jefferson were I would say, meaningfully impacted by the activity in the Middle East. The significant amount of volume historically, fruit oil volume that has come in to Jefferson has originated in Saudi Arabia. And crude oil coming in by ship is particularly, frankly, tight margin obviously, high volume and its big ships, and there's a lot of volume and a lot of margin. And so that historically has been good business for us at Jefferson and things really slowed down in the second quarter.

I think the month of July saw no barrels imported from Saudi Arabia into the U.S. at all anywhere. I think that was the first month some period in the 1980s that the United States did not import one drop of crude oil from Saudi Arabia. So it has certainly been a tough fall luckily, refined products, our ammonia business. Is holding strong and frankly, running at record levels as it relates to refined products. So we've been able to offset some of that softness. I would tell you we are definitely seeing a recovery. It's a little choppy. We don't have incredible visibility into a flow of ships back into Jefferson.

What we're really focused on is helping customers access crude from other production regions. I mentioned in my remarks, we're going to be commencing some new crude business here starting January 1 with actually two new customers, which is great. And a good chunk of that crude is actually coming from the Ueno Basin. And so we're looking at sources outside of Saudi and starting to really grow that into basin crude import. There's actually going to be crude barrels that will likely be exported. But as long as we handle it, we're somewhat indifferent as to where it goes.

So Look, I think the inbound ships are returning. We've certainly seen that in October. But the way to minimize any risk of uncertainty there is to really help our customers find barrels from other destination points so we can replace some of that volume.

Matthew Erdner

Got it. That's helpful. And then just to clarify on the USD assets. Do you expect that to close mid-November.

Kenneth Nicholson

Yes, we're hoping the week of November 16.

Operator

And the next question will come from Jeff Kauffman with Citizens Bank.

Jeffrey Kauffman

Congratulations. Just a terrific quarter all the way around. A question for Ken and bear with me in to be a little convoluted. But I want to hit two items you discussed for the wheeling. Number one, you've got this very large investment by Nippon Steel, and it's going to affect both Gary and Pittsburgh. And I wanted to understand what that could mean over the three-year period in terms of whether it's incremental carloads, incremental revenues and how that plays out.

And then the second is on the cost side. You still have these savings programs and integration plans with the wheeling. How far along are you on the cost synergies? And maybe an easier way to think about it is the railroad did a 76.6% operating ratio, this quarter, and that's how rail people think about things operating ratio. Where can that OR go when these synergies and cost savings are fully implemented? So I guess a question on revenue potential and a question on cost.

Kenneth Nicholson

Great. We will certainly comment on both of those. I'm joined here by John Kerns, who runs our railroad. So I might lean on John for some commentary as it relates to the integration, but let's take the Nippon question first. Nippon committed to about $11 billion of total investment at Gary, Indiana and in the Mon Valley complex. And -- the first piece of that, that we saw was up at the blast furnace, the relining of the blast furnace in Gary and that took the bulk of the summer.

I think we're seeing more volumes going through Gary then frankly, we've seen in a very long time. It's because that's right now, and it's because that blast furnace is back online. So we're really encouraged by that. But the bigger news was just a couple of weeks ago, I don't know if you saw it, but Nippon announced about $3 billion of investment in the Mon Valley complex, primarily focused on U.S. Steel's, EDGAR Thompson integrated mill. They expect the investment to grow production volume for about 2.2 million tons per year to 3.5 million tons per year.

What that means for us is a significant increase in carloads and ultimately, revenue. Hard to say with precision, but I mean it's is well into the tens of thousands of incremental carloads, could be 30,000, 40,000, 50,000 incremental car loads for our Union Railway, which is what serves the Mon Valley complex for U.S. Steel. Now it's going to take a few years for those investments to be made. So we'll start seeing that probably in two years or three years. But it's the kind of activity and volume that will be with us for a very long time thereafter.

And so I'm super excited about what that means. Obviously, there's still more investment to come and we don't have a crystal ball on precisely what that's going to mean, but I'm sure Nippon will continue to make announcements as they commit their $11 billion investment. So probably over the next few years, a good tens of thousands of carloads of incremental volume and that's probably $20 million of incremental EBITDA. So that's the kind of thing we're looking at.

As it relates to cost savings and integration, I'm going to let John talk briefly, and then I'll come back and talk about some of the margins.

Jonathan Carnes

Sure. Thanks, Ken. We're on track for about $19 million of annual cost savings, excluding onetime costs. Most of that is personnel reduction. There's some procurement, purchasing power, if you think about the consolidation of what we bought it just the things we buy, which just don't lower overhead, things like insurance. The full benefit of that will really feel effective January 1 is when kind of the existing agreements come to an end.

And of course, the cost savings also tied closely with our integration. Last Sunday, we cut over the Wheeling and Lake are railroad operating systems, the financial systems were already cut over earlier in the year. It's gone about as smoothly as we could have hoped. Most of it is behind us. There were no meaningful disruptions or service to impact service to customers, really looking forward to the common platform.

There's major benefits there. The operating team immediately was very excited about the visibility and the tools to better manage the railroad, think about speeding up your asset utilization. We just got a whole new toolbox. And we're looking forward to implementing that on the wheeling.

So Overall, the integration is, I said going about as well as we could have expected.

Kenneth Nicholson

Yes. And I would just say on the margins, yes, OR is the industry standard, and we're in the mid-70s. I think these cost savings take us down the Ultimately, we'd love to ultimately get to a six handle, but that's going to take some time.

OR is something we look at. It's not at the top of our list. What is unique about our rail business is cash flow and cash flow conversion. These assets are particularly low capital expenditures. The cash flow generation, about 15% of our EBITDA goes into capital expenditures and 85% is available for reinvestment distribution up to FIP our parent, whatever it may be. Your typical railroad consumes 30%, 40%, sometimes 50% of EBITDA just upon CapEx every year. These railers are shorter, they're more dense. And so we really benefit from a very low CapEx profile.

That's not captured in the OR statistic. And so it's a big differentiator for our business. And when John and I talk about how did the month go, how did the quarter go. We look at margins, of course, and the various cost line items, but we're particularly focused on cash flow for those periods of time.

Operator

And I'm showing no further questions in the queue. I would now like to turn the call back over to Alan for closing remarks.

Alan Andreini

Thank you, Michelle, and thank you all for participating in today's call. We look forward to updating you after Q4.

Operator

This concludes today's conference call. Thank you for participating.