Ladies and gentlemen, thank you for standing by and welcome to the Q3 2020 Fortress Transportation and Infrastructure Investors LLC Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded.

Thank you, operator. I would like to welcome you all to the Fortress Transportation and Infrastructure's Third Quarter 2020 Earnings Call. Joining me here today are Joe Adams, our Chief Executive Officer; and Scott Christopher, our Chief Financial Officer. We have posted an investor presentation and our press release on our website, which we encourage you to download if you've 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 FAD. 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 Joe, 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 Joe.

Thank you, Alan. To start, I'm pleased to announce our 22nd dividend as a public company and our 37th consecutive dividend since inception. The dividend of $0.33 per share will be paid on November 30, based on the shareholder record date of November 16. Now let's turn to the numbers. The key metrics for us are adjusted EBITDA and FAD, or funds available for distribution. Adjusted EBITDA for Q3 2020 was $58.6 million compared to Q2 2020 of $66.5 million and Q3 2019 of $112 million. On a normalized basis, excluding the gains or losses from the sales, Q3 2020 adjusted EBITDA was $59.7 million compared to $65.7 million in Q2 2020 and $74.9 million in Q3 2019. FAD was $39.9 million in Q3 2020 versus $47.3 million in Q2 2020 and $120.7 in Q3 2019. On a normalized basis, excluding sale proceeds and nonrecurring items, Q3 2020 FAD was $23.9 million compared to $38.2 million in Q2 2020 and $48.7 million in Q3 2019. During the third quarter the $39.9 million FAD number was comprised of $74.5 million from our aviation leasing portfolio, negative $300,000 from our infrastructure business and negative $34.3 million from corporate and other.

Thank you, Joe. Operator, you may now open the call to Q&A.

Your first question comes from the line of Guiliano Bologna of Compass Point.

Good morning and thank you for taking my questions. I think, I guess concerning on that two related topics here, when we think about the Lockheed transaction, and the roughly 500,000 per shop visit of savings, is that included in the $375 million EBITDA that you're discussing for fiscal 2021 for aviation?

No, no, that was meant to be the incremental total of the three parts of the Lockheed totaled $100 million and that's incremental to the $375 million.

That makes more sense, so I think when I think about the kind of accretion discussion and you brought up that will offer through the aviation segment and that will be accretive to the guidance of now $375 million, and then the $450 million if we included the additional engines that you're planning on purchasing?

Yes, that is right.

Then, taking it a little bit step further, just thinking about from a timing perspective for a few different initiatives and central catalysts out there, you mentioned hopefully the PMA approval is days away. If you could just give a quick update around where you are in the process, I think you have the application into the first part and you're awaiting approval on the first part, and I'd be curious around the second part if the application is in and if you have a sense of timing for the second part?

That's correct. The first part, there's two parts that we started three years ago are essentially fully engineered, built and developed. The first part of the application is complete and as I mentioned, we're awaiting the FAA has been with us all the way along the way, so we don't anticipate significant delays from here, so that we're very hopeful will be days away. The second part will be finalized in the fourth quarter. The final application should be made by the end of this year. And same thing as the FAA has been involved all the way along the way, so we don't anticipate major delays beyond that. So those are the first two, and then as you remember, we started work on three additional parts in last year, so that would -- we would expect to be done in 2022.

That makes sense. And then a little bit of different topic, when we think about and the remaining 50.1% interest, obviously as you get closer to completing that, the incentive to potentially sell that stake probably increases dramatically. And so, I am sure on that side was, how you think about that asset from a monetization perspective and obviously, we can think about your completed projects and having much higher multiples obviously than the first early 49.9% percent stake that was sold. But just thinking about monetization opportunities and what you might potentially target there, and obviously Jefferson is a little bit of a different situation because you probably need to have a little bit more progress before that becomes sellable in part, but just thinking about monetization of assets on the infrastructure side?

Yes that's -- you are right, I mean that definitely would be something we would look at and think about. It should be operational in Q3 of next year, a year from now or even earlier than a year from now. So, and at that point, that's when you have the maximum amount of contracted revenue. So there were a lot of people that we've talked to over the prior years that expressed interest, but they only wanted to invest when something was up and running and operating, not under construction. So the market widens out and I also think as I mentioned that if we have a carbon free path to power generation through hydrogen, that's also going to be significantly higher value than a carbon power plant of which there are many. So I think the combination of those two things would make it something that we will consider earlier than probably the other two that you mentioned.

That makes lot of sense. I appreciate the time, and I will jump back in the queue. Thank you.

Thanks.

Your next question comes from Josh Sullivan of Benchmark.

Good morning.

Good morning.

Just with regards to the tightness in the aerospace engine market, you're looking at over the next couple of quarters, what is your sense of the overall industry green time remaining? Now, are there any metrics that give you confidence that were, other than air traffic that were chewing into that, are shop visit schedules tightening or are the prices on parts in the secondary market? Just curious, what gives you confidence that you know this dynamic is playing out?

Well, we look at all the data and we have the same information and we had previously indicated we, our numbers that indicate by Q2 of 2021 you'd be out of spare engine capacity and that's if engines are -- can be moved efficiently from one airline to another, but that they can't. And so, I think the most recent indicator that we have is, real customers with airlines or conversations with airlines that are happening now, where airlines are looking at their own planning and seeing that they're going to need engines maybe earlier than that, and that's why we're having conversations now, regarding programs that would start in 2021, because I think they're going to -- they're quickly going to see that they may not have as much available capacity as they would like. So I think they are looking at starting programs now, because there is a lead time to getting these things in position. So that's why I think our timing was, you know, the Lockheed Martin program is optimal because we've started moving modules and engines into that facility now, and can begin supplying engines to airlines pretty quickly in 2021. So we feel like the timing of that, as well as the using up of green time is really optimal and airlines are looking as you know to maximize cash and save cash. And so, going into that with a program to say that we can supply you with engines without you having to invest in older engines is really attractive. So we're hopeful, as I mentioned, that we can, our goal is to sign up 250 engines, which isn't really that much with a -- we'd have over 20,000 engines in the world, it's not that much to get and the contribution would be meaningful also, position us to be a service provider, as well as a leasing provider, which I think is quite valuable.

Got it. I mean do you see other partnerships with other parts or other distribution coming into play here as you kind of expand the capabilities there, the Lockheed overall relationship?

Yes, there is one more part I think that is the used serviceable material is an important component and that's something that we're working on, which would give us really a comprehensive solution across the whole engine. So that's something that given our -- we know all the players and we've had meaningful discussions. We have quite an -- we're an attractive partner because we have 200 engines, and we're going to be adding to that. So I think that that is something that we can -- we've done a lot of work on and I think is something that is sort of the last piece of the puzzle.

Got it. And it just one on the sale leaseback market, has it remained active, do you think we'll see another wave of interest just as global airlines kind of settle into the new reality here?

Yes, I think, it's going to be a very tough winter for airlines. So cash, they're doing everything they can to survive and sale leaseback is a source of cash that they're going to tap. I think that earlier this summer, there was a lot of activity, some of the deals got done and then some of the deals I think are just been pushed back because you've got a lot of government money coming into the airlines and when you get government money coming in the airlines, then everything takes longer because you have another party to negotiate and look at everything. So, but I think that those deals are not dead and they're actually, will be very, there's going to be an active sale leaseback market, I think for at least the next year.

Got it. Thank you for the time.

Yes.

Your next question comes from Chris Wetherbee of Citi.

Hi, thanks so much guys. I wanted to touch on the aviation EBITDA outlook for next year. If you could unpack that a little bit and kind of walk through what exactly is included in terms of assumptions around that? I know you talked about 70 incremental engines kind of going into that as well, but can you talk a little bit about sort of, underlying market conditions that support that? And then obviously, the last question around sale leasebacks kind of if anything is included in that, I just want to kind of make sure I understand that what the walk up is from where we are today to what is that 450 and kind of what you need to see happen to make it at that number?

Yes. So what, so if you look at our current fleet, it's about $1.5 billion and we should do probably about, $290 million, $300 million of EBITDA this year, which is below our target and I had mentioned the impact of COVID on that is sort of right in that range of $50 million to $60 million impact this year. So we see that returning to more normal. We actually had an EBITDA, pre-COVID that was going up in the high 20%, 28%, 29%, 30%, but we're saying, okay, next year we think the airlines that we've backed are survivors, and we will see a return to a 25% of EBITDA margin based on analysis of our portfolio. And we do have a good chunk of assets in the freight market, which is doing really well and will continue to do well and we've added customers like Air France and a couple of other sovereign airlines. So we feel pretty good about 25% on $1.5 billion, so that's the $375 million. Then, turning to this, the incremental investment, we have $200 million of capital under LOI to invest in about 70 engines, all CFM 56 engines. So that's what we've been talking about and what we've been targeting. And the attractive, the pricing on it is very attractive, because there are few competitors with capital that are looking to buy assets right now. So we're able to get very good pricing. It's about $3 million per engine on average. We have some engines that we're buying is actually as cheap as $1 million dollars. So there's a bit of a range, but on $3 million of average for a CFM 56 we believe we will generate within our assumption on utilization for that is approximately 75% and I think that could end up and I think that's a reasonable assumption, it could be, there could be some upside there because I think as I mentioned, there's likely to be a tight market. But 75% utilization generates a 35% EBITDA margin on that $200 million. So that's an incremental 70 million. So if you take $375 million and add $70 million, the 450 number for approximately 450 per annum EBITDA for us for 2021, that's without adding any incremental benefits in the Lockheed Martin partnership, which I mentioned, which we believe will approximately $100 million.

Okay. And there's nothing incremental from national carrier sale leaseback or anything like that involved as well?

No, no, and I think we'll see other good investment opportunities. I really do. I think the market is stressed. It's, as you know, and it's likely to present other opportunities, but we're not factoring that in at this point.

Okay. That's very helpful. I appreciate that. And then, I guess I just wanted to touch base on Jefferson to try to understand maybe the trajectory of that business coming out obviously, I think, as you mentioned, crude by rail opportunities have kind of decelerated and slowed pretty meaningfully. Can you talk about sort of pipeline connections and maybe other potential opportunities in Jefferson as we roll into 2021?

Yes. So the three projects will provide meaningful connectivity and upside for us and it's, we'll have six pipes that should be completed in December that will connect us to the Exxon refinery. And initially, the plan is really we've only got one of those that's being utilized today. So that would be the refined products to Mexico. So we have obviously, lots of conversations going about utilizing those other pipes and that's what I mentioned. The opportunities and there's a definite effect you have when you actually are building something and are about to complete it, you get a much more serious focus and conversation and when you're in the early stages of planning things. So we're hopeful that they'll be a lot higher utilization on those. The timing of that is difficult to predict and definitely the slowdown in demand that the refiners are seeing the demand destruction has been pretty significant. So, the timing is probably the challenge, but once the pipes are done, the leverage is significant. That's one part of it. The other parts are the crude part where we have an inbound crude pipeline connection from Cushing, so that will connect our refinery for crude, which is very important for us to be able to blend, because as you bring crude by rail and you need to blend it with another type of crude. So the crude connection to the pay line connection from Cushing will give us a very competitive and cheap blend stock for crude by rail. Then crude by rail, as I mentioned is showing signs of activity again. We've got trains booked from Utah into the terminal for Motiva and Motiva is the other part of the outbound -- is the other pipeline connection. So we're building the pipe from Jefferson to Motiva. So we can blend, bring in crude by rail blend and then ship by pipe. So it's very efficient supply chain. Then and then lastly, as I mentioned, I alluded to, we've got other pipeline connections that the more options you give these refineries, the more interested they become. And so we now will have multiple connections, but if we can add additional options, then we provide a really high value service because they can switch sources as prices move around. So we're expecting significant upside opportunity again on the crude side, as well as on the refined product side. It's just again the timing of predicting that is hard, but once the pipes are there, we're going to use them.

Yes, okay. That's great detail. I appreciate the time. Thank you.

Your next question comes from Justin Long of Stephens.

Thanks and good morning. I just wanted to circle back on aviation and some of the 2021 commentary. Joe, I think you said on the LOIs that you're expecting to close, the assumption is that utilization will be 75%. I wanted to clarify, is your assumption that utilization will be at a similar level for the existing assets when you gave that guidance for 2021 and is there anything you can share on the trend in utilization in October?

Yes, the assumption is the same for the existing portfolio, approximately 75% and we're seeing very high utilization on the freighter fleet. And as I mentioned, we exited the quarter in September with 60% overall utilization on the existing engine portfolio. So it's been coming up every quarter. The average for the quarter is in the low 40s. So it started out lower and it's been building. And as I mentioned, part of the reason and that Q3 was challenging is it didn't -- July and August didn't pick up until later in the quarter and closer to September. And then, so we're expecting that trend in -- we have engines that we delivered, it also took longer to get engines delivered during Q3 given the travel restrictions and just getting things moved around. But in the fourth quarter, we're expecting that 60% to be trending, staying there or going up and then as I mentioned, we expect as we deploy the new engines and we see an increased tightening market, we expect that 2021 will be at 75%.

Okay, and in October, have you seen that 60% exit rate hold steady or has there been any improvement?

I would say steady.

Okay. And then, this quarter you mentioned that you harvested some non-core assets in aviation. I was curious if that's something we should expect to continue going forward or if this was just something isolated in the third quarter? And maybe you could provide an update on how your assets in aviation break down by customer today?

Sure. So the -- we did harvest some engines and mostly those were CF680 and Pratt4000s, which are engines that fly on 747 primarily or 767s in the freighter market. And the reason we sold some of those is, rather than invest as most of those were unserviceable engines. So you either have to invest in another shop visit or you can sell them into the part market. And then the part market is pretty strong given the demand for freight flying. So from an investment point of view, it made more sense for us to sell them into the partout market than it did to put them through a full restoration and invest for another four or five year cycle. So it was really just sort of a timing issue in terms of taking better bid from the parts market then making an investment and putting them in for another four or five year shop visit, which may or may not be the outlook for 12 to 24 months for those engines is pretty good. The outlook for 60 months is a little cloudy here. In terms of the portfolio, we have about 20% of the portfolio in the freighter market and that is doing pretty well. So obviously that's a bigger portion of our revenues. We have about 60% in the narrow-body market, which is A320s and 737s in CFM engines and about 20% in 757 and 76 market, which is underpinned most of those that we owned in that 75 and 76 are not cargo planes today, but there's a strong bid from cargo companies buying those planes to convert them to cargo. So total portfolio is similar to what it was in Q3. I'd say on the customer concentration now our largest customer is Air France, and we've added a couple state owned sovereign credits. So I'd say there has been a little bit of a shift towards that way on the narrow-body side. And, there's another deal that we're fairly far along on that's closed to where you can push that number even higher. So I think that's the trend line is you'll have more stayed on sovereign credits in the narrow-body side.

Okay, very helpful. I appreciate the time.

Thanks.

Your next question comes from Devin Ryan of JMP Securities.

Hey good morning, Joe. There is really one question from me and when I come back to aviation here, one element of the combination of the Lockheed program that it's at least very interesting to us is the vertical integration of the business. I think that gives the platform a number of competitive advantages over other lessors. I think it could also potentially change the valuation framework relative to others over time. So I'm curious whether you guys would consider separating aviation from the infrastructure business, especially if you're getting to the types of sad numbers next year that are projected, just given that that's a quite a level of scale in the industry. And so, just thinking about the potential to separate the platforms to clean up the corporate structure, and obviously simplify the story and whether you can actually do this based on current debt structure or if it's even something you're open to exploring?

Yes, we've, talked about that before and we are open to looking at it. I think we expressed the goal that we would like, if we did separate them to have each aviation and infrastructure have $1 billion dollar market cap connected to them, so there's enough liquidity in both. And so that's one goal. And I think it is something that we could manage with the debt structure, and we've got ideas, but we don't have a specific timeline or action plan at this moment. I think it would -- it's something though that we believe longer term would make a lot of sense, and it's something that we're going to continue to think about and try to figure out the best timing.

Okay, great. Thank you.

Thanks.

Your next question comes from David Zazula of Barclays.

Thanks for taking my question. Just on the aviation side, I guess my question is, given the harvesting of engines you did this quarter and the Air France deal you did last quarter, has that given you a shift in your geographic end markets? And what do you feel are kind of the benefits and risks of having your current shift in geographic end markets from here?

Well, we haven't, I mean, we've shifted slightly to Europe with Air France and adding, but we still have a fairly diversified between Asia, Europe and U.S., U.S. being the smallest, North America being the smallest, but the assets are very, very fungible. So I think, that's the beauty of aviation is you can move them around and we don't see it right now the global market is moving pretty much in lockstep. There are times where certain regions do better than others, and assets move in that direction. But for right now, there's a relatively, it's not extremely significant in terms of being in one market versus another. So I think that we're happy with the mix we have and I think, as I said, I think we will see a bigger shift to state owned or sovereign airlines, just because those are the airlines that are getting the funding from governments, and that's where the assets are going to be the most stable and the most solid. So I think, we're trying, we're targeting those tiers specifically. So as I'm sure everybody would say, would make sense. So we'll see a shift to sovereign credits as opposed to any region in particular.

Thanks. And then, on the maintenance side, as the FAA approval timeline appears to be stepping up, have you gotten orders in? And if so, how quickly, could you ramp up to start processing your orders? Thanks.

Yes, the production is in the works, so there's pretty quick inventory availability and there are orders for parts already. So once the part is approved, it can be made very quickly, and we've indicated our interest in orders as well given our orders for our owned aircraft, our owned engines for next year. So there's not a big lag. This has been, it's been a long process of getting approval, so there's been plenty of time to plan production.

Great, thanks Joe.

Thanks.

Your next question comes from Ari Rosa of Bank of America.

Hey, good morning, Joe. So it sounds like you have a lot of confidence in that, in the $450 million EBITDA figure for next year. Similar to kind of Chris' question, to what extent is that kind of contingent on a recovery in passenger traffic or something of that sort? And kind of in line with that, do you see this quarter as kind of being a trough for what we should be able to expect in terms of EBITDA and FAD going forward, because obviously, you're still covering the dividend, which is great? But I think, as you mentioned in your prepared remarks, this was probably a little bit softer than what some of us were looking for. So, in terms of looking at 2021, just maybe if you could give some parameters around how much confidence you have in that 450 number and what that implies for kind of that across the business?

Well, obviously, we feel pretty good about it. But, but obviously, COVID is still now out there and you see Europe and Germany and France, taking steps to shut down again. On the other hand, you have countries in Asia where they've had no infections in Taiwan, and China's back to pre-COVID flying levels. So it's quite varied around the world, but people are figuring out how to, manage it, and people are flying. The U.S. had a million passengers in September, so I think people are getting there without a vaccine. Obviously, many airlines are pushing, hoping for vaccine and therapeutics and the sounds around that from the people that know better than I know is that people are pretty optimistic that there will be something available pretty soon. Now how quickly that is effective or not, and then you also see airlines starting to do rapid testing. British Airways, if you are flying to London, you can get a rapid test now three days a week for everybody on the plane. So the airlines are working in countries to try to figure out people want to the back flying and traveling. So it's not without some risk that there is a snapback, but it feels like it's going to keep moving up and getting better. And what happened I think a little bit in the third quarter is that, it just took longer. People were not rushing to get there as quickly as it seemed like they were. So that the risk I think is more on the timing side, but we feel pretty good that something, people are getting better and people are improving how they manage. And, there's a lot of, you know, a lot of good signs out there, although this week doesn't feel hard to feel great about it, but it's, it does feel like we can, people will get a handle on it and 2021 should be much better we hope.

Got it, understood. And then just, in terms of the MRO deal, Lockheed is obviously very reputable in this space. Maybe you could talk a little bit about kind of the nature of the discussions that you had with them? And, if I could ask you to speculate, why do you think from their perspective, they chose FTAI as a partner?

Well, we've been talking about this for two years. We've been looking at trying to find the right partner for us for our business, and what we were looking for is, someone who valued our flow of business. And we have, as I mentioned, 200 engines, which is 40 shop visits a year already, and they see and we see opportunities that's going to grow. And so that's, what's very attractive, that's what we brought to the table. And lots of people were interested. I mean, we had conversations with all over the world with many, many different parties. But Lockheed is very reputable, as you point out. They have a fantastic facility is probably the best facility we -- of any of them, that we saw with 300 shop visits a year, it's the order of Air Canada engine shop. And their timing is, they needed, they don't have a lot of flow there, and then post-COVID, the outlook just got even further pushed out. So I think that's what they liked. What we -- we wanted to get the ability to have to be an important customer and to create this module factory is something we've also been talking about before, because if you can have modules available, you can avoid a full restoration shop visit pre-COVID was taking in some cases nine months. So if you actually only need to work on the low pressure turbine and you need a module, you can pull that off, and you can have an engine out within 30 days. So you can dramatically reduce the time that engine needs to be idle. So that was not easy for us to be able to get from a lot of different MROs. They just wouldn't accommodate that or they didn't have the space or the availability. So that was a big part of the discussion and they did have the room. They have the capability and they're actually very excited about that capability and what it will do for their business and ability to attract other business. And we did that deal without having to invest in their shop. They weren't looking for us to buy an interest. Some of the other deals we were looking at, we would have had to invest capital. We would have had to buy tooling. We would have had to buy an equity interest and we were able to avoid all that. So I think that, what we got was everything we needed without having to really do something that we didn't want to do.

Got it. That's great color Joe, thanks for the time.

Thanks.

Your next question comes from the line of Frank Galanti of Stifel.

Yes, hi, Joe. Thanks for taking the question. One to follow-up actually on that last question on the Lockheed partnership, so I get that you guys are able to bring in volume to write the MRO business, which is in need of shop visits. But why isn't Lockheed doing this directly? You guys had said that you're targeting 250 engine, 50 visits a year and you're able to save a million dollars or I guess, more than a million dollars on the proprietary or I guess on the module part. But it feels like Lockheed is giving up too much and maybe I'm reading into that too much. Are they that desperate for shop visits or yes?

Well, I think it is a difficult time for an MRO. So I don't think that, I mean, I don't, I wouldn't characterize them as desperate, but I do think it helps them at a critical time. But if you look at the maintenance MRO business, we've talked to a lot of these airlines that they very few of them are owners of engines and so in order to create a module factory, you need inventory and you need to own engines and you have to have a critical mass. And I'm not saying the MRO shops couldn't do it, but they don't do it. They very few go to their board and say I want to be in the engine leasing business and I want to go invest several $100 million and build a business when they have no history or capability or leasing team or whatever, it's a vertical integration. So we came at it and we do a fair amount of business with other MRO shops as a private label provider of engines. So an MRO will go out and pitch their shop visit services to an airline and says, can you get me an engine while my engine is in the shop? And a lot of the times the MROs will come to us and say do you have an engine for us? And so we're like a private label leasing providers of spares. So we've been and we serve the aftermarket. So we don't, we're not the OEM. So you also have to find an MRO who is aftermarket oriented as opposed to OEM oriented. And those further limits the number of people that have -- that are in that market. So it was a long hunt, but it worked out great for us timing wise. And I do think it's a good deal for Lockheed as well, because, there's going to be a lot of flow and this hopefully gets them started on bringing other customers and other businesses. And then if we start doing PMA, and we develop a program with an airline that could that end up flowing to them as well. So I think they see upside in addition this is not just a deal they had to do.

Okay, that's actually really great color. I appreciate that. So effectively, you guys are bringing to bear CapEx in the form of engines and you're sort of leasing out space. What so how much is that going to cost you guys and then is how much are the minimum volumes? And is there any economic share with Lockheed in this deal?

We don't rent space. So, but we do have some minimum volume commitments into the seven year. And I would characterize that as modest and very manageable from our point of view. But, that's something that was very important to them and we are committed to that, but we don't pay rent. So we're just going to be using the shop for shop visits, and also have the ability to store modules and keep modules there. So that's very attractive in terms of that. And we are -- if you think about the industry, airlines don't have capital. Maintenance shops don't have capital. And we are one of the few places that you actually are willing to invest in engines. So that gives us a huge kick a big boost to the business right now that we didn't anticipate or we didn't see a year ago. But the timing on that if we can go to airlines and partner and say we can provide all of your needs, and do it for a lower cost and save you capital, that's a pretty compelling proposition that I think is going to be very significant for us going forward.

Yes, it sounds like a great deal. Just one last question from me. Just kind of following-up on the 75% utilization you guys expect for your engines in 2021. Most of the question is around pricing power, are you having to get, are you having to reduce pricing in that scenario, where utilization kind of bounces back next year?

No, we've -- the engine leasing business has never been really a price sensitive business from that point of view that it is -- the prices tend to be set by the OEMs. And they set prices very high because they're always charging a lot for their parts and raising prices, so we fall under that umbrella. And usually when someone needs an engine, they don't go out with an RFT, they actually call a handful of people and they get engine and it's typically not the CFO who is negotiating with you. It's somebody that has to get an engine because they need to fly a plane on the maintenance side. So it's very difficult to move engines by cutting the price is what I'm saying. And it's much more of a demand driven need based decision and it's not really -- we haven't seen pressure on rents and maintenance reserves also keep going up every year because the OEMs keep raising prices.

Okay, great. That's all I had. Thanks so much.

Thanks.

Your next question comes from Randy Binner of B. Riley.

Hey, good morning. So shifting back away from aviation, I appreciate the comments on Jefferson terminal and the pipes coming to completion in December. Yes, I apologize if I missed it, but was there, did you give any kind of quantification of financial impacts for that? Looking longer term, I know, it's not as defined as everything we talked about in aviation, but some parameters there, and then possibly also on the Long Ridge data center saving opportunity, just kind of maybe digging into timing and the longer term financial impact, if you could?

Yes, so we've said that Jefferson, when the pipelines are built and operating we will be at an approximately $80 million EBITDA run rate. What is a little harder, given the COVID delays for the refineries is predicting the timing exactly of that. But we will have the pipes done in the next two to three months and we're hopeful that we'll have commercial deals in place shortly thereafter to get us to those, to that number or even higher. In terms of Long Ridge, we have engaged a number of data centers and talked to them about providing them the site and the power and so we have multiple proposals out. And I think the hydrogen play is one that's actually very helpful, because it's not just any data site at that point, it's a data center with a hydrogen story on hydrogen play, which is very helpful. So we turn on the power plant in the third quarter of next year and so we're hopeful that before we turn it on, we'll have actually signed for a tenant and a construction project by then and then hopefully, early in 2021 is our goal.

Okay, but at this point there's no numbers, broad numbers you can give as you're still in negotiations?

Right, we did say that if we're able to sign up, I mean, because if we sign up a tenant on our site, we will generate closer to sort of mid 40s in terms of dollars per megawatt hour versus high 20s today. So significantly higher power revenue, and if we're able to contract half of the power output, the EBITDA for the total power plant would increase from $120 million up to $140 million to $150 million. And obviously, if there's a hydrogen play or component to that, we think that the multiple devaluation multiple would also be much higher.

Perfect, thank you.

Thanks.

Your next question comes from Rob Salmon of Wolfe Research.

Hi, good morning, Joe and thanks for taking the question. As we think about the utilization outlook for 2021 of 75, can you help us bridge kind of the improvement from roughly 60% from September up to that 75? Is it real kind of a better run rate exiting September than the overall average? Is this related to the timing of some recent deals or is there something related to a vaccine that’s embedded in your forecast?

Sure, so we exited the quarter at about a 60% average and so it's been steadily trending up. If you look at every month over the last since April, it's been trending up. And we also have a number of programs that have been taken up by some airlines over the next few months and we talked about early 2021 we're seeing demand for engines now that we have. So we've taken the numbers and prior to COVID we were -- our engine utilization was as high as 80%. So we basically mapped out and we continue to see high utilization on the freighter fleets. And it's really the recovery of the pasture markets that is taking the numbers up to back to levels where they historically were. And part of that, as I mentioned is the fact that shop visits are way down. So if you have excess available engines and you stop doing all shop visits, you quickly use up available engines and you'll see engine utilizations increase well before aircraft utilization, because aircraft lasts a very long time, engines have to go into shop every five years.

Actually, Joe, that's a nice segue into my follow up question on the MRO deal with Lockheed. And, you guys have got capacity to kind of increase up to 300 units annually. Can you give us a sense of where that minimum is? I realized you probably can't speak to exactly the level, but clearly you're going to have a need for 40 shop visits a year, kind of how many visits above that amount are you guys kind of required to tap through put at the facilities for the module factory?

The minimum would be well below that amount, not above it. So it's not something that I think is significant, you know, commitment or worry about us being able to meet that minimum.

But I mean, the number of shops are find is like you're required, you're basically required 40 shop visits annually. I'm assuming it's above the 40, but obviously significantly below the 300.

Oh you mean what our fleet would be?

Correct? Yes, like what your required throughput is going to be anyway, on an annual basis - required minimum.

When you say required, the minimum is going to be very low of what a minimum committed now we have to give as part of the deal, well below what our current requirements are. So you can approximate how many shop visits you'll have by just taking 20% of the total number of CFM engines we own, which is if -- I said if we had 200 engines, 20% is about 40 shop visits a year today and we expect that to grow, but the minimum that we've committed is well below that number.

Okay, that's really helpful, so you can understand kind of the risk return parameter there. And my final question is with regard to that $200 million of LOIs, can you give us a sense of when you expect that capital to be deployed, just so, we're kind of incorporating the right level of EBITDA from the LOIs for kind of 2021? Is that significantly…?

I think it will be late Q4, and early Q1.

Perfect. I appreciate the time, guys.

Thanks.

Your final question comes from Robert Dodd of Raymond James.

Hi, guys. Just a follow-up on that one first and then one other this should be quick. On the MROs Joe, on the minimums, does that minimum have an escalator over time or is the building in the assumption of growth or is the minimum now the minimum – color?

And it is, it's like a, it has rollover points too. So, if you don't use it, you can roll it. So it's very flexible. I don't think that will be as significant. I have very little concern about that minimum that we ever get anywhere near it.

Okay, perfect. On the other part, on the various elements you talked about, obviously the $450 million in EBITDA from the equipment, the Lockheed various components of that, that you spelled out that could add up to eventually like an incremental $100 million a year. You mentioned when you said that, based on existing contracts, approvals, et cetera, so did that include any benefit from the parts approval or not? And to put it in another perspective, if that, if your first part got approved by the FDA, FAA say tomorrow, what would the impact from that already be included in what you've discussed or would that be incremental on top of that, and could you give us a ballpark if it would be incremental?

Well, I think when you go through the pieces to the element that I think that will be facilitated, but not necessarily required to get that is being able to manage shop visits for other airlines, and I mentioned the partnering of 250 engines or 50 shop visits a year. The approval of those parts will be helpful for us to make that million dollars and save the airline a million. So it's not entirely impossible. We couldn't do that without it, but it will be facilitated by that. So I would say a portion of the $100 million is really a function of us having these first two parts available next year.

Got it. I appreciate it. Thank you.

Yes.

There are no further questions at this time. I would like to turn the conference back over to Mr. Andreini for closing remarks.

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

This concludes today's conference. You may disconnect at this time.