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 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 a 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 that are essentially fully engineered, built, and developed. The first part of the application is complete and, as I mentioned, we're awaiting the FAA, which has been with us along the whole way, so we don't anticipate significant delays from here, so we're very hopeful it 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 last year, so we would expect to be done in 2022.

That makes sense. And then a little bit of a different topic, when we think about 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 do 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% 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, you're 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 a 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 that our numbers indicate that by Q2 of 2021, you'd be out of spare engine capacity and that's if engines can be moved efficiently from one airline to another, but 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 quickly 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 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 as we'd have over 20,000 engines in the world, it's not that much to get, and the contribution would be meaningful also, positioning 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 that I think is the used serviceable material, which is an important component. We are actively working on this to provide a comprehensive solution for the entire engine. Given our knowledge of the industry and the meaningful discussions we've had, we are considered an attractive partner because we have 200 engines and plan to add more. I believe this is something we've invested a lot of effort into and it's essentially the final piece of the puzzle.

Got it. And 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 being 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 million 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 are 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 if you take $375 million and add $70 million, the $450 number is 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 be 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. The three projects will enhance our connectivity and bring significant benefits. We plan to complete six pipelines by December that will link us to the Exxon refinery. Currently, only one of these is in use for transporting refined products to Mexico. We are actively discussing how to leverage the other pipelines, which is critical as being closer to completion leads to more serious discussions and focus than during the planning phase. We hope for higher utilization of these pipes, but predicting the timing is challenging, especially given the notable decrease in demand that refiners are experiencing. Once the pipelines are operational, we expect significant leverage. Additionally, we have a crude pipeline connection from Cushing, which is vital for blending purposes since we transport crude by rail and need to mix it with another type of crude. This connection will provide us with a competitive and cost-effective blend stock for crude by rail. Activity in crude by rail is picking up, as we have trains scheduled from Utah to the terminal for Motiva, which is part of our outbound pipeline connection. We are constructing a pipeline from Jefferson to Motiva to facilitate blending and transportation through pipelines, optimizing our supply chain. Lastly, as I mentioned, we have additional pipeline connections planned. The more options we can offer refineries, the more interested they become. With multiple connections, we can provide a high-value service as refineries can switch sources based on price fluctuations. We anticipate significant upside opportunities on both the crude and refined product sides, although the timing of these developments remains uncertain. However, once the pipelines are in place, we are ready to utilize 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 for the existing portfolio remains around 75%, and we are seeing very high utilization of the freighter fleet. As I mentioned, we finished the quarter in September with 60% overall utilization for the existing engine portfolio, which has been increasing each quarter. The average for the quarter was in the low 40s, as it started out lower and has been improving. One reason Q3 was challenging is that July and August did not see a pickup until later in the quarter, closer to September. Additionally, we experienced delays in engine deliveries during Q3 due to travel restrictions and logistics. However, we expect the utilization to trend at around 60% or higher in the fourth quarter, and as we deploy new engines and the market tightens, we anticipate reaching 75% in 2021.

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. We harvested some engines, primarily CF680 and Pratt4000s, which are used on 747s and 767s in the freighter market. We decided to sell some of these engines because investing in them for another service visit wasn't as advantageous. Instead, we opted to sell them in the parts market, which is currently strong due to demand for freight flying. From an investment perspective, selling them was more sensible than restoring them and committing to another four or five-year cycle. This decision was largely based on timing—taking a favorable bid from the parts market rather than making an investment for another lengthy service visit. While the outlook for those engines over the next 12 to 24 months is encouraging, the five-year forecast is less clear. In terms of our portfolio, about 20% is in the freighter market, which is performing well and contributes significantly to our revenue. Approximately 60% is in the narrow-body market, covering A320s and 737s with CFM engines, while around 20% pertains to the 757 and 767 market, mainly owned non-cargo planes. However, there’s a growing interest from cargo companies looking to convert these planes. Overall, our portfolio remains similar to what it was in Q3. Currently, our largest customer is Air France, and we've added a few state-owned sovereign credits, indicating a slight shift towards more state-owned entities in the narrow-body sector. Additionally, we are close to finalizing another deal that may increase that number further. The trend suggests an increase in state-owned or sovereign credits in the narrow-body market.

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 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 have discussed this before and are open to exploring it. Our goal is to potentially separate the aviation and infrastructure sectors, aiming for each to achieve a $1 billion market cap to ensure sufficient liquidity for both. That's one of our objectives. We believe this could be managed within our current debt structure, and we have some ideas in mind, although we do not have a specific timeline or action plan right now. However, we believe that, in the long run, this makes a lot of sense, and we will continue to consider the best timing for it.

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 that 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 a 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 get 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 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?

We've been discussing this for two years as we've sought the right partner for our business, specifically someone who values our business flow. With 200 engines already generating around 40 shop visits annually, we see substantial growth opportunities. This is what's appealing, and it has attracted significant interest. We've engaged in conversations globally with numerous parties. Lockheed, in particular, stands out as a highly reputable entity with an exceptional facility—probably the best we've encountered, given their capacity for 300 shop visits a year, comparable to Air Canada's engine shop. Their current situation is that they lack sufficient flow, and post-COVID, their outlook has been further delayed, which is possibly what attracted their interest in us. We wanted to ensure we could be a key customer and establish a modular factory, which we've discussed previously. Having accessible modules means we can avoid lengthy full restoration shop visits, which pre-COVID could take up to nine months. If we only need to address the low-pressure turbine, for instance, we can replace it within 30 days, significantly reducing engine downtime. Gaining this capability was challenging with various MROs, as many couldn't accommodate our needs due to space or availability constraints. Lockheed, however, has the resources and is genuinely excited about enhancing their operations and attracting more business. We accomplished this agreement without needing to invest in their facility or acquire an equity stake, unlike other deals we considered that would have required capital investment and tooling purchases. Essentially, we secured everything we needed without engaging in commitments we were not inclined to pursue.

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?

I believe it's a challenging period for an MRO, and while I wouldn't describe them as desperate, the situation does provide them with crucial support. In the maintenance MRO sector, we've spoken with many airlines, and very few own their engines. To establish a module factory, you need to have inventory, own engines, and achieve a certain scale. While I'm not suggesting that MRO shops can't do this, most do not pursue it. Rarely do they approach their boards to propose entering the engine leasing market and invest hundreds of millions to build a business, particularly when they lack the necessary history, capabilities, or leasing team. It's all about vertical integration. We approach this differently by partnering with other MROs as a private label provider of engines. When an MRO offers its shop visit services to an airline, they often ask if we can supply an engine while theirs is being serviced. Thus, we act as a private label leasing provider of spare engines, servicing the aftermarket rather than being an original equipment manufacturer. This means finding an aftermarket-oriented MRO as opposed to one focused on original equipment manufacturing, which further narrows the pool of potential partners. Although it took time, it ultimately worked out well for us in terms of timing. I also believe this deal is beneficial for Lockheed, as it will facilitate significant business flow and hopefully lead to attracting more customers and new opportunities. Additionally, if we begin developing a PMA program with an airline, that could also benefit them in the long run. So, they likely see potential beyond just fulfilling this immediate deal.

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, but we do have some minimum volume commitments over the next seven years. I would describe those commitments as modest and very manageable from our perspective. This aspect was essential to our partners, and we're committed to it, but we do not incur any rent expenses. Instead, we'll be using the facility for shop visits and will have the capacity to store and manage modules there, which is very appealing. Considering the industry, airlines and maintenance shops typically lack capital, and we are among the few willing to invest in engines. This provides a significant boost to our business, which we didn't foresee a year ago. If we can approach airlines with a proposal to fulfill all their needs at a lower cost while saving them capital, it presents a compelling opportunity that I believe will be very important for us in the future.

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?

The engine leasing business has never really been sensitive to price. Prices are primarily set by the OEMs, who tend to charge high rates for their parts and consistently raise prices. When someone needs an engine, they typically don't conduct a request for tender; they usually reach out to a few contacts to secure an engine, and it's often not the CFO negotiating the deal. Instead, it's someone who urgently needs an engine to maintain flight operations. Therefore, reducing prices is not an effective way to increase engine movement. The decision is typically driven by demand rather than price cuts, and we haven't experienced any pressure on rental rates. Additionally, maintenance reserves continue to rise each year as OEMs increase their 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?

We ended the quarter with an average utilization of about 60%, which has been consistently increasing each month since April. Additionally, several airlines have adopted various programs in the coming months, and as we look towards early 2021, we're already seeing demand for engines. Before COVID, our engine utilization reached as high as 80%. We have observed high utilization rates in freighter fleets, and the recovery in the passenger markets is driving the numbers back to historical levels. A significant factor in this trend is the decrease in shop visits. With excess available engines and a reduction in shop visits, the available engines are utilized more quickly, leading to increased engine utilization prior to any rise in aircraft utilization, as aircraft can remain operational for much longer while engines require servicing approximately 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 throughput 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.

When you ask about our fleet, the minimum requirement is very low compared to what our current commitments are. You can estimate the number of shop visits by taking 20% of the total CFM engines we own. For instance, if we had 200 engines, that would mean about 40 shop visits per year today, and we anticipate that number to increase. However, our commitment is well below that figure.

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 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.