Fortress Transportation and Infrastructure Investors LLC (FTAI) Q2 2021 Earnings Call Transcript

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Fortress Transportation and Infrastructure Investors LLC (FTAI)
Q2 2021 Earnings Call
Jul 30, 2021, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q2 2021 Fortress Transportation and Infrastructure Investors LLC Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Alan Andreini.

Alan John Andreini -- Investor Relations

Thank you, April. I would like to welcome you to the Fortress Transportation and Infrastructure Second Quarter 2021 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 in our press release on our website, which we encourage you to download if you have not already done so. And 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 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.

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

Thank you, Alan. To start today, I'm pleased to announce our 25th dividend as a public company and our 40th consecutive dividend since inception. The dividend of $0.33 per share will be paid on August 30, based on a shareholder record date of August 16. Now let's start with the numbers. The key metrics for us are adjusted EBITDA and FAD, or funds available for distribution. Adjusted EBITDA for Q2 2021 was $68 million compared to Q1 2021 of $47.2 million and Q2 of 2020 of $66.5 million. FAD was $68.3 million in Q2 2021 versus $14.4 million in Q1 2021 and $47.3 million in Q2 2020. On a normalized basis, excluding sale proceeds and nonrecurring items, Q2 2021 FAD was $15.7 million compared to $9.8 million in Q1 2021 and $38.2 million in Q2 2020. During the second quarter, the $68.3 million FAD number was comprised of $116.2 million from our aviation leasing portfolio, negative $2.5 million from our infrastructure business and negative $45.4 million from corporate and other.

Now starting with aviation. Aviation experienced a meaningful increase in activity in passenger markets in Q2 and our portfolio of engine products and services is picking up momentum. While we achieved our goal of $80 million of EBITDA in Q2, up from $60 million in Q1, we are seeing a slightly slower ramp due to continuing COVID travel restrictions related to the Delta variant, particularly in Europe. As a result, we are now projecting 2021 EBITDA of $400 million as compared to our previous projection of $450 million for the full year. The engine leasing market is particularly strong as airlines look to ramp up flying while continuing to minimize maintenance capital spending. Q2 was our second most active quarter for engine leasing with 23 new leases delivered, bringing engine utilization to 65%, excluding new engine acquisitions. We recently started new programs with two to five engines each with major airlines in the Americas that we could see growing to over 20 engines each over the next year.

While a little bit behind the Americas, we expect the same phenomenon to occur in Europe later this year. Also, new investment opportunities are increasing, as illustrated by our agreement to purchase 12 A319s on four year lease to one of the U.S. majors. Our three CFM56 maintenance product programs are all gaining momentum and broad market acceptance. The USM, or used serviceable material program in Q2 with AAR, was very active with approximately 15 million orders booked or closed. The strong and growing demand gives us confidence in hitting our targeted 20 engine teardowns this year with $1 million per engine profit or $20 million total profit for 2021. Our module factory has also been busy with 125 active users on the website and a handful of sales or exchanges consummated. We have big aspirations for growth in the module factory in the next 12 to 18 months, with several sizable active campaigns now being negotiated. Thirdly, PMA with Chromalloy has made big strides with the second part in production preparing for final submission to the FAA in September. All in all, the market is shaping up better than we had hoped for our unique and proprietary approach to the commercial jet engine market.

Now let's turn to infrastructure. Starting with Repauno. At Repauno, the high levels of activity this quarter by bringing the long-term vision into sharp focus. We started in 2016 with a vacant property of 1,600 acres on the Delaware River with Conrail rail service and a small underground unused storage cavern. By 2024, we expect to have completed a fully capable world-class natural gas liquids hub comprising 3-plus million barrels of highly efficient underground storage capable of handling butane, propane, ethane, condensate, propylene and other refined products for export via all size ships, including VLGCs and for import opportunities as market dictates. Product movements will be available by rail, both inbound and outbound, via Norfolk Southern or CSX; by water across multiple new high capacity deepwater docks by type from all major North American-producing regions; and by truck via our new state-funded highway access road. And all of this in one of the most desirable East Coast locations. In addition, we have 250-plus developable acres, which are ideally suited and will likely be utilized for staging and manufacturing of offshore wind farm components and new plastics recycling facilities.

And the reason we are highly confident that this vision will become reality is we're doing much of this today. In Q2, we brought in 1.1 million barrels of LPG by rail and safely have efficiently loaded 17 marine vessels at our docks. We moved butane to local markets by truck, and have expanded our capabilities to handle propane. And importantly, we are on the map with global LPG players throughout the value chain. Turning to Long Ridge. I'm pleased to report that the 2.5-year $600 million-plus power plant construction project is nearly complete two months early and on budget, thanks to the more than 500 skilled and hard-working men and women involved in designing and building the state-of-the-art highly efficient power plant. We expect full-scale 24/7 operations to start in early September. As a reminder, we've entered into seven to 10-year fixed price power sale contracts that start in early 2022, with investment-grade counterparties for 94% of the plant's output, and we have secured 100% of the natural gas requirements and an effective low-cost fixed price through our ownership of local gas wells, thus locking in a spread for 8.5 years.

Importantly, we are on track by the end of this year to become one of the first hydrogen fuel power plants in North America and the first worldwide in the GE H-class turbine. Having multiple pathways to generating carbon-free energy is a high priority, and we believe, extremely valuable. Like Repauno, we're fortunate to also have 200-plus acres of attractive well connected developable industrial property to add to the site's upside value. We are in active negotiations with three different crypto mining companies to host their operations and provide low-cost 24/7 power with the option to confer to carbon-neutral power as well. With lots of interest and different approaches available, we've been focusing on minimizing our investment in crypto-specific assets while maximizing the upside through fixed price power contracts and profit sharing. We believe an investment of $20 million or less in transformers, which have multiple uses for us, will have a one year payback. We're also in the final stages of negotiations to host the facility that uses a new technology to make biodegradable plastics using natural gas and electricity as the primary inputs.

Finally, our frac sand and road cell transloading operation achieved record volume in Q2 of nearly 300,000 tons, up from 230,000 tons last year. Now, Jefferson. The big development of Jefferson is obviously the new 10-year contract with ExxonMobil. The new operation will utilize the recently built pipelines connecting Jefferson with the ExxonMobil Beaumont refinery, which is undergoing a major expansion and Jefferson's marine docks. Jefferson will construct 1.9 million barrels of new storage to be utilized by ExxonMobil for refined product storage and export beginning in January 2023. In addition to the significant ExxonMobil base volumes, this infrastructure will enable us to attract additional customers to further optimize this new domestic and international refined products hub. Combined with the existing growing refined products rail to Mexico business, this new strategic Jefferson ExxonMobil client further enhances the logistics capability of the Beaumont refinery complex. Our crude business with Motiva is also poised to grow again following reduced refinery throughput due to the COVID-related demand disruption.

But with volumes picking up, we're seeing Motiva utilizing the existing storage and pipeline connectivity for pipes barrels from Cushing via our Paline connection, imported fuel oil by water, wax crude rail from Utah and renewed focus on Canadian heavy crude by rail. So with our growing array of connectivity options in prime location next to the two largest refineries in North America, we're extremely excited about the list of commercial opportunities ahead that will leverage and optimize our investment in Jefferson's infrastructure. Turning now to Transtar. We are pleased to report that the acquisition of Transtar from U.S. Co closed yesterday. So next quarter, we will be discussing financial results for this new segment. We're excited to add a significant rail business, which performs critical functions at two major North American integrated steel complexes under exclusive long-term contracts. And while we're just getting started, we have identified several opportunities for near-term operating improvements and long-term growth, including developing the four additional railroads included in the deal. Transtar has a strong management team in place who are all very excited to grow and expand the business, and we are very much looking forward to getting at it. Turning now to a couple of corporate items. First, we launched this week a $425 million municipal bond offering at Jefferson.

The proceeds will finance expansion capex, including assets related to the 10-year Exxon deal and approximately $175 million to be upstream to FTAI and available for general corporate purposes. Rates and terms for these long-term nonrecourse financings continue to be extremely attractive. And this cash infusion of $175 million at the parent level, along with approximately $150 million in revolver capacity, puts FTAI in a very strong liquidity position. Second, with the two infrastructure enhancements now done, we will be progressing the plan and accelerating the time line to split Aerospace and Infrastructure into two companies and eliminate K-1s for shareholders. We hope to have the time line defined in Q3 with a goal of executing the spin before year-end. To sum up, both Infrastructure and Aerospace are in great shape. In Infrastructure with the addition of Transtar which has a 15-year initial term, and the new 10-year contract with ExxonMobil at Jefferson, we have substantially increased the amount and tenor of contracted revenue and EBITDA, as was always our plan. Adding Long Ridge, which is already over 90% contracted and having strong indications at Repauno from suppliers and off-takers in executing long-term contracts, Infrastructure is more than ready to become a stand-alone company. With aviation, the transition to a vertically integrated aerospace company, targeting the largest engine market in the world, is well underway. And with recovery, while not in a straight line, is definitely happening.

With that, I will turn the call back to Alan.

Alan John Andreini -- Investor Relations

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

Questions and Answers:

Alan John Andreini -- Investor Relations

[Operator Instructions] Your first question is from Josh Sullivan with the Benchmark.

Josh Sullivan -- Benchmark. -- Analyst.

Hey. Good morning.

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

Good morning.

Josh Sullivan -- Benchmark. -- Analyst.

Just a question on the new 12-plane lease order you have with the major U.S. airline there. Can you give us some color around that contract? Is this a new relationship? What's the total opportunity there? Do you think this is going to attract other U.S. major airlines of similar caliber going forward?

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

Yes. We're very excited about it. It's a -- as I mentioned previously, we've -- I think, given the pandemic, we've been able to access airlines that previously will probably we would not have had as much access to. And part of it is just the need they have for capital, but also part of it is the focus on the engine side of the business. So we see that as a door-opener for more business, but also the ability to integrate our products offering into the mix in terms of the equation. So when we go -- when their shop visits are due, we can be talking about module swaps, TMA, used serviceable material, and we're already doing it that some level with this existing airline. So it gives us the opportunity to increase the volume. One of the prohibitions, obviously, people have always had is that if you have an asset that's owned by a leasing company and you want to put PMA in it, usually, the leasing companies have been -- prohibited that. We actually, if we own the asset, we have the ability to give ourselves permission. So -- and we can do so at a very, very low cost. So I think it is a door-opener for us to, as I said, vertically integrate provide a broader range of services than anybody has ever done before and actually save them money. And we see very -- I think the level of interest in both USM and PMA is very, very high. So I think as this picks up, it's going to give us additional ways to do business with big carriers.

Josh Sullivan -- Benchmark. -- Analyst.

And then maybe just more broadly, could you just give us color generally on the leasing market? Are durations extending on leases? How is the lease-up marketing responding to the uptick here and then the Delta variant?

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

Yes. I think the engine leasing market is heading up very nicely. I mean, we're not doing any -- I think the error when people are doing power by the hour deals is over. Lease rates are trending up. terms are extending out. So I think it's -- the recent deals we've done in the engine side are virtually as good as what we were doing in 2019, and I think it's going to go higher. It basically a law of supply and demand. As we know that everybody is deferring maintenance as much as they can, and so they're starting to line up assets and they're lining up engines, in particular, for longer terms. So we're getting -- I think our portfolio has now extended out 18 months. And we're signing up -- we just signed up deals with a large airline that have a three-year term. So I think rates and terms are going up. And maintenance reserve rates, which is also another sort of very important economic part of the lease, are -- have never really went down. And the manufacturers, the maintenance reserve rates are set by taking the estimated cost of a shop visit and dividing it by a number of hours. And the OEMs keep raising the parts prices even in this pandemic period. So maintenance reserve rates are still very strong. So all in all, I think the engine lease market is trending up very nicely.

Josh Sullivan -- Benchmark. -- Analyst.

And then if I could just sneak one last one in here. Can you just talk a little bit about the market for GE 56 assets on the secondary market, just what you're seeing at this point?

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

Yes. Most of what we've been trying to do is buy older are A318, A319s, 777, 700s and then get rid of the airframe. So we're buying engines by buying a whole plane and then scrapping the airframe. And the acquisition of that way is -- makes the most sense. We've been acquiring assets at probably the lowest prices we've ever bought them at. Sometimes lower than $1 million for an engine. So it's -- that's been very fruitful. We added 27 new engines in the second quarter, which is one of the reasons our utilization looks a little bit lower because we found some really good investments to put on the books. And that reflected about 10 points of utilization. So really, it was more like 65, but the -- but that's the best way to create an engine today because there's very -- there are very few buyers for off-leased older assets. If you have not -- if you don't have revenue stream tax and it's an older asset, it's -- we might be the only bid. So we like that dynamic.

Josh Sullivan -- Benchmark. -- Analyst.

Appreciate your time. Thank you.

Operator

Your next question is from Giuliano Bologna with Compass Point.

Giuliano Bologna -- Compass Point -- Analyst.

Good morning. I guess following on a similar topic. You're talking about some lease rates moving higher, and there's been some industry discussion around that point. I'd be curious, not necessarily specific dollar-wise, but I'd be curious from a magnitude perspective, kind of how much lease rates have moved, at least on a percentage basis, kind of where they were and are they up 5%, 10%, 20%? I'm just curious from a magnitude perspective, how much lease rates have been moving for -- specifically CFM56 engines?

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

Yes. I would say that probably from the pre pandemic -- the bottom of pandemic, we probably declined 25% -- 25%, 30% to the worst. And I think most of that 25% to 30% now has gone. It's back very close to pre pandemic.

Giuliano Bologna -- Compass Point -- Analyst.

That's great. And then thinking about the Aviation business in a little bit more holistically. You obviously have the module factory, which seems to be kicking off and seeing some early success. I'd be curious if there's a sense of kind of the magnitude of the -- or how big you could grow the module factory from a kind of a throughput perspective? Because you obviously have to have some engines in inventory and kind of what that opportunity could look like over time?

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

Yes. You do have to have some engine is in inventory. And we currently, I think, on 200 CFM56 engines. So a lot of the airlines we're talking to right now are looking at starting with programs that could be 10 or 20 a year. So talking about 10 or 20 modules. But they have fleets that could be hundreds of engines. So they're looking at that as really a starter kit. So we think that basically, we can grow -- if we get people started doing it, then it has the flywheel effect, and you can just grow with them. So our 200 engine fleet might grow to 300, 400. Just remember, there's 22,000 engines in the world of this type. So going from 200 to 400 to 600 doesn't really move the needle. And so I think we can scale our inventory, along with the needs of the customer. But the upside of how many could people do is really very significant, very many. Once they integrate this into the way they operate on the maintenance side, it's quite significant. And then if you put on top of that, you add PMA into it, which will start to happen next year, it could become even much bigger.

Giuliano Bologna -- Compass Point -- Analyst.

That's great. And then just thinking about the -- the split of the business. You obviously have a few different components that should be decent contributors starting next year, you got Transtar, I think the numbers you guys have put out so far, about $80 million. You have about $70 million to $80 million is kind of the discussed run rate for Jefferson, which I'm assuming should be scaling up now that all the pipelines are complete there. And you have another, call it, $60 million from the power plant, kind of $15 million from Repauno. That puts you in the $200 million. So obviously, there's by some overhead that would get allocated to that segment. So it's a decent business. Kind of looking beyond that, you have the Exxon deal. But then you were making some comments about Repauno and expanding, call it, three million barrels of storage. Which kind of sounds like the old Phase two that had been discussed. I'm curious if there's been any change to kind of the Phase two project or outlook? Because it used to be, call it, $500 million of capex ballpark and then the expectation was $150 million of EBITDA. Are you still pursuing a similar strategy? Is that what you're referring to in 2024.

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

Yes. That was really of the completed Phase two. And it hasn't changed. We've zeroed in on more -- I think more specifically on exactly what we need to build and when we need to build it. And the capital expectation, I think, is less than $500 million at this point, partially because we've invested already some of the infrastructure that's going to be used so it's -- I would think it's more of a $400 million. And the other thing that's changed is I listed about eight different products. When we first started this, we were thinking propane and butane, but we've had lots of different ideas from people coming to us actually suggesting propylene, as an example, or some of the natural gas liquids, condensate, some refined products. And then we've had further discussions of fairly recent about pipeline connectivity which would also expand both the capabilities as well as the product offering. So I think it's only gotten better in terms of the upside, and the capital is probably a little bit less than what we had forecast. So it's -- if I didn't sound enthusiastic saying that I am extremely enthusiastic because it's all happening. And the conversations are live and real.

Giuliano Bologna -- Compass Point -- Analyst.

That's great. I appreciate all the insight [Indecipherable]. Thank you.

Operator

Your next question is from Chris Wetherbee with Citi.

Chris Wetherbee -- Citia -- Analyst.

Thanks. Good morning guys. Maybe just touching on Jefferson here. Obviously, getting the Exxon deal done was a great step in the right direction. It seems like there's probably a decent amount of storage opportunity or space go up facility. And my guess is you probably building interest in coming to you guys. I don't know, Joe, if you can just maybe give us a little bit of color in terms of what sort of the deal prospect pipeline looks like at Jefferson right now? I'm guessing there's probably a couple of deals in the hopper that maybe could be coming through fruition. And then maybe if you could talk about what the timing of that might look like? I don't want you to trump around what you have here, but I'm just kind of trying to get a sense of what the ramp-up might look like.

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

Yes. I think we've -- we continually -- every time we do a deal or we have a meeting, we end up with a longer list than when we started. So it's the fun part. And so we've got multiple projects, sort of a handful of projects with each of Exxon and Motiva that are real. I would say that they always -- with these large entities, they always take longer than we would like, but we do get there. That's one of our sort of -- we seem to have staying power in these negotiations. So we -- but the number of opportunities are significant, and it's on both refined products and crude. And if you think about from the macro point of view, these are the two -- in 2023, Exxon will be the largest refinery in North America. So it's 600,000 barrels a day in and 600,000 barrels a day out and the same for Motiva.

So you're talking over one million barrels a day right in our backyard. So we have lots of things that happen and things that we don't even anticipate like importing fuel oil, for example. We would never have guessed that that's something on the radar, but that becomes a topic or storing an intermediate. So a lot of these things come about because you just have regular conversations, but there are many, many different projects once you get once you get connected and once you're in a regular dialogue. Timing-wise, the building of new storage takes about a year. So it's -- we have probably the lead time on a lot of these projects to do that. Now that we have the pipes, though, it's a lot easier because you can go and say we have a connection already, so we don't have to worry about that part of it. And so it's -- mostly, these discussions, I would say, the typical lead time would be nine months through a year.

Chris Wetherbee -- Citia -- Analyst.

Okay. Okay. That's helpful. I appreciate that. And then just making sure I understand here. I want to go back to the Aviation guide. The $50 million there, can you -- what are sort of the variables that sort of could drive that to $400 million that maybe leave that a little bit higher than $400 million or maybe create some risk to it? I guess I just want to make sure I understand what of the most important dynamics of that guide are as we think about hitting that for the rest of the year.

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

Yes. The two biggest movers would be the number of flying hours. So as airlines ramp up flying, our revenues increase on the maintenance reserve side. And so if you look back, I think it was third quarter of 2019 was our best quarter because it was 85% utilization, and every airline was flying 300 to 400 hours a month -- or so every aircraft. So that's probably the biggest one, and that's where the ramp-up of services, particularly in the U.S., we've seen a lot. South America, we've seen a lot. Europe has just lagged. It's just been slower with all the cross-border. I mean United States is great because 50 states, you can always travel more, not always, I should say, but historically, you could travel between one state and another without showing a passport. But in Europe, it's different. So I think that is -- it's slower, but Europe will follow and I indicated I think that will happen later this year, where you'll start to see more flying. But the activity -- flying activity is number one. And then the second is acquisitions. And so we've got the one deal I mentioned is closing this week or next week. And then we have one other large deal with a European carrier that should close by the fourth quarter. So those, I think are the two, utilization of flying hours and acquisitions.

Chris Wetherbee -- Citia -- Analyst.

Okay. That's super helpful. I appreciate the time this morning guys. Thank you.

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

Thanks.

Operator

Your next question is from Justin Long with Stephens Inc.

George Sellers -- Stephens Inc -- Analyst.

Hi, Good morning. This is George Sellers on for Justin. I guess to start, could you talk about the EBITDA you expect to be generated from the maintenance and parts pieces within Aviation? And any update you could provide around the ramp of that number into the second half of this year and into 2022 would be great.

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

I assume you're talking about the three JV, the USM and the -- what's the third -- the...

Scott Christopher -- Chief Financial Officer

Lockheed Martin

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

Lockheed Martin -- the module factories. So those three.

George Sellers -- Stephens Inc -- Analyst.

Yes, exactly.

Josh Sullivan -- Benchmark. -- Analyst.

We believe that $50 million for the year is still a good number for those three, that the decrease from $450 million to $400 million was largely on leasing revenues. So those three will produce about $50 million this year. We haven't forecast yet for next year, what we think those will be, but safe to assume it's going to be higher.

George Sellers -- Stephens Inc -- Analyst.

Got it. Okay. That's helpful. And then turning to Jefferson. Could you walk through your latest thoughts on how you expect EBITDA to ramp at Jefferson through this year and then into 2022 as well? And as you think about that expectation, maybe you could also speak to the level of visibility you have around that based on contracts that you already have in hand?

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

So we're -- we believe that the run rate for the fourth quarter, the end of 2021, for Jefferson will be $70 million to $80 million. So that and next year -- again, we haven't really put an official forecast out there, but I would assume $100 million or north.

George Sellers -- Stephens Inc -- Analyst.

Okay. Great. Thanks so much. I'll leave it there.

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

Thanks.

Operator

Your next question is from Rob Salmon with Wolfe Research.

Rob Salmon -- Wolfe Research -- Analyst.

Hey. Good morning guys and thanks for taking the question. I guess, Joe, just to start off with just a bigger picture question, could you discuss how you expect the two companies to look following the split from a capital structure perspective as we look forward?

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

Sure. We're -- I mean, we're targeting to maintain the level of debt of each company and maintain a BB rating for each one. So part of the next few months in the process of going that with our own financial modeling and then also rating agencies to work through the details, but that's our objective. But it will be -- the infrastructure business would be in a U.S. domestic seaport and we'll have mostly project-financed debt, like the Jefferson bonds. We talked about our Long Ridge are all financed at the entity level. And then the corporate debt would be at Aviation, which will be a non-U.S. corporation, and we would be targeting that to maintain the BB rating.

Rob Salmon -- Wolfe Research -- Analyst.

That's helpful. And I mean, historically, the FTAI Company more broadly has kind of targeted both growth as well as kind of a return of capital to shareholders. How do you see kind of the dividend playing out across the two companies? Have you guys kind of thought through those dynamics at this point? Or is that still a work in progress?

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

Yes. We don't anticipate a change in that. I think it's still going to be the investment objective is going to be income plus growth. So I don't expect that to change.

Rob Salmon -- Wolfe Research -- Analyst.

Got it. And that would be true for both of the companies looking forward?

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

Yes.

Rob Salmon -- Wolfe Research -- Analyst.

Perfect. And then a couple of...

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

Yes. Historically, I think you would see higher dividends on Aviation than you would see on Infrastructure.

Rob Salmon -- Wolfe Research -- Analyst.

Yes. That makes sense given the investments. And then just a couple of quick follow-ups with the Aviation segment. Can you give us a sense of the capital investments that you guys are planning in the back half of the year that's underpinned in the $400 million of EBITDA you're expecting that company to generate?

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

Right now, we're looking at about $300 million of additional investments that are all under LOI. So we haven't added anything beyond that.

Rob Salmon -- Wolfe Research -- Analyst.

Perfect. And is that pretty evenly weighted between the two quarters? Or is it more fourth quarter? I know you had mentioned there's a big deal you're expecting to close in the fourth quarter. And obviously, just closed the large one with an American Airline.

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

We're not supposed to say that, but -- yes. I would say evenly weighted.

Rob Salmon -- Wolfe Research -- Analyst.

Yes, yes. No, got it. Helpful. And then that's right. And if we look at the June, just the June in terms of the utilization rate, can you give us a sense how that exited the quarter relative to the 65% utilization ex the adjustments that you had noted with the transaction you guys completed during the quarter?

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

It was -- I think when -- the exit rate was up from the beginning of the quarter about 10 percentage points. I think we put 23 engines on lease, as I think -- and were added during the quarter, which is a pretty good quarter. And we expect probably to potentially put 30 on in Q3.

Rob Salmon -- Wolfe Research -- Analyst.

Appreciate it. Thanks for the color.

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

Thanks.

Operator

Your next question is from Frank Galanti with Stifel.

Frank Galanti -- Stifel -- Analyst.

Great. Thank you for taking my question. I wanted to follow up on, I guess, the three horsemen or whatever you want call it, the JV, the module factory, the USM, you said $50 million was your expectation for this year. Can you kind of talk about how -- I guess, what does that assume has been done already, specifically in the second quarter?

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

It's probably about five of it.

Frank Galanti -- Stifel -- Analyst.

Okay. That's helpful. And kind of staying on the Aviation side, can you talk about the second PMA part? Or I guess the PMA parts generally, how is the first one been -- kind of give us an update on how the penetration has been from an interest level from third parties? And then how the -- if there's an update on the time line for the second and three, four, five parts.

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

Yes. So on the first part, the interest level is very high. We have a couple of airlines that have ordered it -- you have lot feedback from -- Frank, feedback on the phone. We have a lot of interest -- a couple of big airlines have ordered it and one airline is actually flying it and installed it. And I think the further penetration is a bit delayed because there's not a lot of shops that's going on. So it is most airlines, as I mentioned, are burning off green time, so they're not doing a lot of major overhauls. So a lot of the airlines are waiting until that builds up, and they're also waiting to be able to pair it with the second part, which we expect, as I said, to have that final submission of the FAA in September, which would hopefully imply a year-end approval. And that's the first two. The second batch of parts is expected for late 2022, early 2023, those additional three parts.

Frank Galanti -- Stifel -- Analyst.

Okay. That is helpful. And then I think for the last question, I wanted to walk through kind of capex needs. In your prepared remarks, you'd mentioned part of that financing at Jefferson, $175 million is going to be upstream to the parent. You've got $150 million left in the undrawn revolver, but you'd mentioned about $300 million capex needed for the aviation and I could be off on this, but the Transtar purchase was closed. But I guess, just wanted to walk through what level of equity contribution is needed from FTAI kind of across the various businesses. And then add on to that, the $100-plus million at Jefferson needed for the expansion. What are the capex needs in the next few quarters?

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

So the Jefferson capex needs will all be financed by this bond offering. So there's zero needed for Jefferson, zero needed for Long Ridge, zero needed for Repauno. So those are easy. Transtar is fully financed, which closed yesterday. And then as you mentioned, if we do $300 million of acquisitions, we've got $175 million plus the undrawn revolver to fund that. So there are no additional capital -- unfunded capital requirements for this year. Everything is funded.

Frank Galanti -- Stifel -- Analyst.

Okay. Great. That's very helpful. Thanks very much.

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

Thanks.

Operator

[Operator Instructions] And your next question is from Robert Dodd with Raymond James.

Robert Dodd -- Raymond James -- Analyst.

Hi guys. A question on the dividend, this feels like a flashback. Previously, Joe, you've said when FAD covers the dividend by a factor of two, you'd consider taking up the dividend. Obviously, by my math, certainly by the fourth quarter, maybe the third you'd be in excess of that. Obviously, that'll also be right before the spin or separation. So can you give us any thoughts on is that still a good rule of thumb? And does that apply to maybe the separated businesses as well?

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

Yes. It is a good rule of thumb. And yes, your math is pretty good, and we will factor that in. If and when it's sort of coincident with the spin, we'll build that in.

Robert Dodd -- Raymond James -- Analyst.

Okay. Got it. Thank you. One more, if I can, unrelated to that. You talked about the leasing rates are basically back to pre-pandemic levels. But at the same time, the airlines are burning down all their green time. Which -- lack of, do you think there's meaningful upside to lease rates? I mean, we can see what happened in the rental car market. If you run a lease -- if you run your portfolio down, eventually, pricing moves significantly. Do you think there's a risk in your favor of a material uptick in lease pricing if airlines continue to run green time down while you've got available engines?

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

Yes. We've been saying that all along. So we think by the fourth quarter of this year, first quarter next year, that there's demand will outstrip supply. Now unlike rental car companies, we can't go from charging in $80 a day or $800 a day. So we will most likely -- what we've done historically is just get better longer terms and higher maintenance reserves and just better all-around deals. The rent -- airlines get very, very sensitive to rent, so you try to find other ways to make more money because that becomes a relationship thing. I mean you don't want to -- if you're going to do continuing business and you doing parts on the maintenance side and you're building programming, you don't want to take full advantage of your position or you'll pay for it later. So it's -- grant is a little bit, but there is you're not going to be flexible on it. Because if rents -- if everyone else is paying $60,000 a month, you're not going to go and give them a deal at 30. So you'll get -- you might get 50, but instead of a 12-month deal, you get a three-year deal and you maybe treat the maintenance reserves and make them higher.

Robert Dodd -- Raymond James -- Analyst.

Got. it. Got it. Appreciate it. Thank you.

Operator

There are no further questions at this time. I will now turn it back to Alan Andreini for closing remarks.

Alan John Andreini -- Investor Relations

Thank you, April, and thank you all for participating in today's conference call. We look forward to updating you after Q3.

Operator

[Operator Closing Remarks]

Duration: 45 minutes

Call participants:

Alan John Andreini -- Investor Relations

Joseph P. Adams Jr. -- Chairman of the Board and Chief Executive Officer

Scott Christopher -- Chief Financial Officer

Josh Sullivan -- Benchmark. -- Analyst.

Giuliano Bologna -- Compass Point -- Analyst.

Chris Wetherbee -- Citia -- Analyst.

George Sellers -- Stephens Inc -- Analyst.

Rob Salmon -- Wolfe Research -- Analyst.

Frank Galanti -- Stifel -- Analyst.

Robert Dodd -- Raymond James -- Analyst.

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