Q4 2024 Solaris Energy Infrastructure Inc Earnings Call
Speaker Change: Good day, and welcome to the Solaris Energy Infrastructure fourth quarter and full year 2024 earnings teleconference and webcasts. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: After today's presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Yvonne Fletcher, Senior Vice President in Finance and Investor Relations. Please go ahead.
Speaker Change: Thank you, Operator. Good morning and welcome to the Solaris 4th Quarter 2024 Earnings Conference Call.
Speaker Change: Joining us today are our Chairman and CEO, Bill Zartler, and our President and CFO, Kyle Ramachandran.
Speaker Change: Before we begin, I'd like to remind you of our standard cautionary remarks regarding the forward-looking nature of some of the statements that we will make today. Such forward-looking statements may include comments regarding future financial results and reflect a number of known and unknown risks.
Speaker Change: Please refer to our press release issued yesterday, along with other recent public filings with the Securities and Exchange Commission that outline those risks.
Speaker Change: I would also like to point out that our earnings release and today's conference call will contain discussion of non-GAAP financial measures, which we believe can be useful in evaluating our performance.
Speaker Change: The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP.
Speaker Change: Reconciliations to Comparable Gap Measures are available in our earnings release, which is posted in the news section on our website.
Speaker Change: I'll now turn the call over to our Chairman and CEO, Bill Zartler.
Bill Zartler: Thank you, Yvonne, and thank you, everyone, for joining us this morning.
2024 was a tremendous year of transformation for Solaris.
Bill Zartler: We generated strong, free cash flow in our legacy Solaris Logistics Solution business and found a great opportunity to reinvest that cash through the acquisition and subsequent growth of a mobile power generation business that is now Solaris Power Solutions.
Bill Zartler: I'll start this morning by giving you an update on our power solution strategy, including the latest power generation capacity order and long-term customer contract that we announced last night in our earnings release.
Bill Zartler: We're only six months into our journey of building a premier behind the meter power as a service company and our team has done an incredible job executing on this strategy.
Bill Zartler: Our power solutions fleet began with just over 150 megawatts generation assets. Last quarter, after executing on a series of orders and several multi-year customer contracts, we were on a path to grow to around 700 megawatts by early 2026.
Bill Zartler: Last night, we announced the next leg of growth for the power fleet. We recently placed a new order for an additional 700 megawatts that doubles our fleet size to approximately 1,400 megawatts or 1.4 gigawatts by early 2027.
Bill Zartler: We believe this additional capacity will allow us both to service growth with our current customer base and add new customers.
Bill Zartler: Speaking of supporting customers, last night we also announced a strategic long-term partnership with one of our current customers that includes a contract for a minimum of approximately 500 megawatts with an initial term of six years for a new data center.
Bill Zartler: We are also finalizing the formation of a joint venture with this customer to jointly own the power plant equipment supporting the new data center. Kyle will provide more detail on the structure of this partnership later.
Bill Zartler: We believe this latest fixture and joint ownership agreement is indicative of the evolving nature and importance of the market for behind-the-meter power, as well as a strong testament to Solaris' high-quality value proposition.
Bill Zartler: We're excited about the continued momentum we observe for Solaris Power Solutions. Today's power applications are getting larger and more numerous, coupled with customers recognizing the longer-term nature of their requirements that has driven this nearly ten-fold increase of our business to 1.4 gigawatts.
Bill Zartler: A single data center today can require well over a gigawatt of power, and some oil field and other microgrids are approaching 100 megawatts in power demand.
Bill Zartler: are integrated behind the meter power solution is well suited to satisfy those needs.
Bill Zartler: The growing need for power is being driven by the electrification of everything, the domestic reshoring of manufacturing, and the growing quantity and scale of data centers. Demand for power has outpaced investment in infrastructure, creating a significant opportunity for a power solution segment.
Bill Zartler: This has resulted in extended grid interconnection wait times, in turn driving a greater need for bridge and permanent behind-the-meter long-term power solutions, which we are well positioned to supply.
Bill Zartler: For many customers, that bridge timeframe is extending, thus, behind-the-meter power is evolving toward more permanent power, which will supplement the grid by helping manage complex loads, providing redundancy, and potentially even improving grid resilience.
Bill Zartler: The notion of bring your own power is becoming a requirement for many industrial applications.
Bill Zartler: We define this total offering as power as a service, which for Solaris reflects our business model whereby we provide both behind-the-meter power generation
Bill Zartler: and Distribution Services into our customer-specific applications, which are becoming increasingly complex and require 24-7 operation and oversight.
Bill Zartler: Power as a service also means we are filling the role of the electricity provider for our customers, which requires combining reliability and agility with compelling economics and emissions profiles.
Bill Zartler: Delivering reliable power-as-a-service starts with a culture of collaboration and creative problem-solving led by the right team and supported with the right equipment. This proven framework has been the cornerstone of our logistics business and now we're applying the same principles to build our power business.
Bill Zartler: Our Power Solutions business is guided by its founders, who are not only steering operations, but also mentoring the next level of talent. As recognized industry leaders, both bring extensive expertise in designing, installing, and managing electrical infrastructure.
Bill Zartler: We also recently added Max Izaguerre to our board. Max is a former chairman of the Texas Public Utilities Commission and a former ERCOT board member.
Bill Zartler: Max spent much of his career developing power and other power and natural gas-related infrastructure projects, both in the U.S. and international, and he brings to us an invaluable perspective on the power markets for Solaris.
Bill Zartler: As we continue to integrate, our teams are creating operational synergies.
Bill Zartler: We've repositioned several groups such as engineering, internal manufacturing, and information technology to service both power and logistics. We're also cross-pollinating the power solutions field team with talent from our logistics solutions business.
Bill Zartler: Being reliable, agile, and cost-competitive also means we need to have the right equipment to optimize each customer's application. Today, our fleet is standardized around medium-sized gas-fired turbines that range in size from 5 megawatts to 38 megawatts.
Bill Zartler: These block sizes provide flexibility to design tailored power solutions for the customer's need and operating parameters.
Bill Zartler: This also allows us to effectively scale with our customers' power needs in all phases as we retain the ability to move power around the site as customer needs dictate. Our turbines offer substantial power density so they are well-suited for larger projects including those requiring gigawatts of power demand.
Bill Zartler: A portion of our recent equipment orders are purpose-built modular systems designed to stay on location for longer periods of time, offer enhanced fuel efficiency, and additional state-of-the-art emissions control systems.
Bill Zartler: I mentioned earlier that we are observing an evolving need to have behind-the-meter power on location for extended periods of time.
Bill Zartler: The majority of the turbines in our fleet are built on a technology that produces the lowest NOx emissions available in the turbine market.
Bill Zartler: This advantaged starting point helps us make the addition of emission controls economic for our customer and enables us to help drive a best-in-class emissions profile.
Bill Zartler: We continue to build our asset and contract portfolio with a focus on opportunities where we can provide power on a multi-year contract. As we build our fleet, we'll be able to service a wider range of applications.
Bill Zartler: This could include providing power for other data centers, other commercial and industrial facilities, oil and gas production and midstream, and possibly also having a smaller portion available for short- and medium-term power needs, such as emergency power or shorter term grid delays that provide attractive returns.
Bill Zartler: We plan to remain disciplined in our deployments and expect our attractive returns on our capital over time.
Speaker Change: Returning to Solaris Logistics, we're seeing a significant increase in our activity in Q1. We expect at least 15% sequential increase in fully utilized systems despite a relatively flat outlook for overall oil and gas completions. The increase in Solaris Logistics activity is being driven by the continued adoption of our new technology and market share gains.
Speaker Change: We believe this reflects the excellent job our logistics team has done in winning work with new and existing customers and the unwavering service they provide for our customers.
Speaker Change: Over the past few years we've developed additional equipment to complement our sand silo systems on each well site that increase trucking efficiency. We call this add-on kit the Topville system.
Speaker Change: In the fourth quarter, approximately 70% of our locations have both our legacy sand system and a top fill system. Going into the first quarter, we expect closer to 75% of our sites to have multiple solar systems and we are effectively sold out of our top fill solution.
Speaker Change: The financial impacts to Solaris of having two systems on location is a near doubling of the earnings potential per location, which we expect to materialize over the coming couple of quarters.
Speaker Change: Last night, we also announced that our board has approved Solaris' 26th consecutive dividend of $0.12 per share for both A and B class shareholders.
Speaker Change: Fundamentally, both of our businesses are cash generative and we believe that continues to support our long history of returning cash to shareholders and puts us in a unique position to both grow shareholder returns and invest in growth.
Speaker Change: We are excited about the results for both business segments. The continued momentum we are seeing in the Solaris Power Solutions segment and the exceptional team and innovative culture that we continue to build.
Speaker Change: We are focused on maximizing shareholder value through growing the company and maintaining our dividend without sacrificing the strong financial profile of our business. With that, I will turn it over to Kyle.
Kyle Ramachandran: Thanks Bill and good morning everyone. I'll begin this morning by providing additional details on our updated order book, the associated growth capital spending, and our latest thoughts on finances.
Kyle Ramachandran: We also encourage you to refer to our earnings supplement slide deck, which was published last night on the investor relations section of our website under events and presentations.
Kyle Ramachandran: Our recent incremental 700 megawatt order effectively doubles our operated fleet to 1,400 megawatts.
Kyle Ramachandran: Pro forma for all deliveries, approximately 90% of the resulting fleet will consist of 16.5 and 38 megawatt units, which we think results in a fleet that offers an attractive level of power density while still allowing us to be responsive to our customers' needs for scaling and flexibility.
Kyle Ramachandran: We expect to take deliveries under this latest order mostly over the course of 2026 with full effective deployment of our fleet in the first half of 2027.
Kyle Ramachandran: As Bill mentioned, we are excited about the long-term partnership we are forming with an existing hyperscaler customer.
Kyle Ramachandran: We've reached an agreement with this customer to provide a minimum of 500 megawatts for an initial tenor of six years for a new data center, and we are in the process of finalizing details of a joint venture arrangement with our customer to support this investment.
This joint venture structure appeals to us for many reasons.
Kyle Ramachandran: It aligns our interests with those of our customers. It also demonstrates the long-term nature of the customer's commitment to behind-the-meter power given their desire to retain partial ownership in these assets.
Kyle Ramachandran: This capacity roughly 450 megawatts are available for future contracting with customers for deliveries beginning in the second half of 2020 six the pace and trajectory of our ongoing commercial discussions that gives us confidence that we will contract the remaining capacity.
Kyle Ramachandran: The addition of the contract announced last night also helps to extend our average contract tenure in a very short period of time, we have extended terms from approximately six months to four to five years on a blended basis, including this most recent contract at six years.
Kyle Ramachandran: Bill mentioned, a few of the primary drivers behind accelerating contract tenure extension of lead times for grid power as well as an evolution of strategy to include behind the meter power at a more permanent basis in certain applications as primary power.
Kyle Ramachandran: We offer this solution at an all in cost that is competitive with todays grid, which in our view the higher inflationary risks as compared to the structure behind the meter generation under a long term contract.
Kyle Ramachandran: I'll now describe our earnings potential once the fleet is fully deployed.
Kyle Ramachandran: At full deployment, we expect the total company to generate $475 million to $500 million of adjusted EBITDA on a consolidated basis accounting for the contemplated joint venture structure, we expect adjusted EBITDA net to Soliris approximately $400 million to $425 million. These.
Kyle Ramachandran: These estimates consider the current contract book and assume a three to four year payback on the unconstructed equipment, we have on order today.
Kyle Ramachandran: As we continue to work with our existing and potential customers to dresser evolving power needs, we see the potential for our fleet to continue to grow in the future. We also see potential for growth beyond our generation capacity to include Adjacencies, such as distribution amount balance of plant and equipment.
Our recent investment in emission control equipment as an example, when we have opportunities to continue growing our earnings per customer location.
Kyle Ramachandran: On a consolidated basis, the incremental orders should add approximately $600 million to our prior capital lessons.
Kyle Ramachandran: Allowance for balance of plant and emissions control technology, we expect the JV to reduce flares as capital requirements by approximately $215 million.
Kyle Ramachandran: We're currently in discussions with our term loan lenders, who are supportive of providing flexibility under the existing agreement to pursue our growth plans and have expressed support for potential additional features.
Kyle Ramachandran: Turning to a recap of our fourth quarter 2024 performance and our guidance expectations for the next two quarters.
During the fourth quarter slash generated total revenue of $96 million, which reflected a 28% increase from the prior quarter due to a full quarter contribution from Soliris power solutions as well as continued activity growth in power adjusted EBITDA of $37 million represented a 68% increase from the prior quarter.
Kyle Ramachandran: So whether it's power solution contributed more than 50% of our adjusted EBITDA mix is on track to contribute nearly 80% of our earnings after our on order fleet is deployed.
During the fourth quarter, we earned revenue on an average of approximately 260 megawatts and Solaris power solutions in the first quarter of 2025, we are increasing our activity guidance as measured by average megawatts or any revenue by 20% to 360 megawatts. This increase is being driven by increased power demand from our.
Kyle Ramachandran: And we are meeting this demand and combination of accelerated deliveries of our equipment orders and selective sourcing third party turbines for the second quarter, we expect average megawatts on revenue to increase by 17% to approximately 420 megawatts.
Kyle Ramachandran: And our Soliris logistics solutions segment, we expect fully utilized systems to grow over 15% to approximately 90 to 95 systems and remain there for the first half of the year, we expect profit persistent to return to third quarter 2024 levels as we demonstrate strong incremental profitability on the systems going back to work.
Kyle Ramachandran: For a corporate unallocated expense impact to adjusted EBITDA, We expect approximately $9 million of expense in the first quarter due to the expected cash settlement of stock based performance units granted in 2023 and 2024, we expect a more normal run rate expense of approximately $7 million in Q2.
Kyle Ramachandran: These items net to adjusted EBITDA between 44, and $48 million in Q1, and adjusted EBITDA between 50, and 55 million for Q2.
Kyle Ramachandran: For more detail on the guidance and other corporate modeling items, such as interest expense depreciation and amortization tax rate and share count to use for modeling purposes. Please refer to our earnings supplement slide deck.
Kyle Ramachandran: As Bill mentioned, our board recently approved a 26th consecutive dividend at <unk> 12 per share, which will be paid on March 21st a whole mix of record as of March 11 2025.
Kyle Ramachandran: During our latest share count this should equate to a little more than $8 million.
Kyle Ramachandran: Pro forma for the first quarter dividend payment, we will have retired $198 million to shareholders. Since we began our shareholder return program in 2018.
Kyle Ramachandran: We are excited about the growing opportunity for soliris in both of its business lines. We will remain focused on generating strong returns on capital invested as we continue to build our power solutions business, while maintaining strong cash generation from our logistics business, our shareholder return program via dividends and attractive financial profile.
Kyle Ramachandran: With that we'd be happy to take your questions.
Kyle Ramachandran: We will now begin the question and answer session.
Kyle Ramachandran: Ask a question you May press Star then one on your Touchtone phone if.
Kyle Ramachandran: If youre using a speakerphone please pick up your handset before pressing the keys.
Kyle Ramachandran: To withdraw your question. Please press Star then two.
Kyle Ramachandran: At this time, we will pause momentarily to assemble our roster.
Kyle Ramachandran: And our first question will come from Stephens, Inc. <unk> with Stifel. Please go ahead.
Speaker Change: Thanks, Thanks, good morning, everybody.
<unk>.
Kyle Ramachandran: I think my my first question is just around.
Kyle Ramachandran: Sort of the opportunity, but obviously, it's been a it's been a crazy six months to watch, but when we think about sort of the new relationship that you have created and kind of the opportunities out there and maybe kind of keeping the supply chain in mind, what what what could this look like two or three years out what kind of what's the what's the vision from here.
Kyle Ramachandran: Internally.
Kyle Ramachandran: Well I mean, you hit the nail the head when you said, it's been a wild ride we continue to ensure that we can execute flawlessly as we grow this fast. So there's obviously that's a key part of this and we're watching the market, obviously theres a lot of a lot of talk about our commercial activity going on around it and we're balancing how fast we believe we can exit.
Kyle Ramachandran: With the combination of having no growing our team to the right level and having the right set of equipment supplies, both generation and distribution balance of plant type equipment and so we're balancing those off as we look at new commercial opportunities, but there still is.
Kyle Ramachandran: Plenty of growth opportunities in the market as we look forward.
Speaker Change: Okay. Thanks, and then my follow up question was I think I have a sense for this from what you announced in the level of detail you guys provided is very helpful.
Kyle Ramachandran: When we think about the.
Speaker Change: Profitability per megawatt and then we also think about it in the other.
Speaker Change: The other side you have the price that you're paying per megawatt has there been any it doesn't seem like it but has there been any material change or trend there.
Speaker Change: Kind of given the demand outlook on one hand, and given the supply chain constraints on the other.
Speaker Change: I think the step change was about a year ago and some of the supply areas I think we've seen it generally creep up and you know, we're obviously watching what happens with the tariffs and how that impacts some of the supply chain, but it's not been material yet, but it's slowly creeping up and I think we have.
Speaker Change: That will get in the market will absorb those additional costs on call. Yeah, I think what I would add is the initial fleet in this business was all mobile in nature was on absolute and wheels.
Speaker Change: And that carries a slightly larger.
Speaker Change: <unk> per megawatt cost and as we look at the equipment that we've just recently ordered.
Speaker Change: It is modular in nature and it's assembled on site, it's not intended or its best case uses them to be moved.
Speaker Change: As frequently as an asset sitting on yields would be and so I think that the read through is we can be a little bit more competitive from a dollar per megawatt capital costs.
Speaker Change: As we transition women that's meant to stay in a location for a much longer period of time. So when we look at the six year contract. The equipment that we're pairing that with is larger in nature in terms of megawatts per unit and with that we're also driving some efficiencies on the.
Bill Zartler: The heat rate nature of that equipment and the all in total cost of ownership for our customer, but how can we be more efficient. So I think theres. Some puts and takes certainly we're keeping a close eye on supply chain inputs, such as tariffs as bill alluded to but we're also doing some things from a purchase decision which is.
Bill Zartler: Being fed somewhat by the market, that's driving longer duration behind the meter solutions.
Bill Zartler: That can take a slightly different looking piece of capital.
Speaker Change: Got it great. That's good color. Thank you.
Speaker Change: And our next question will come from Derek <unk> with Piper Sandler. Please go ahead.
Derek: Hi, good morning, everyone and congrats on all the announcements I just wanted to talk about you know obviously the six year contracts. The Testament to your solution offering talk about powers of service, providing that reliable power can you maybe put into context, and maybe educate us in the market on the complexity required to power. These general AI data set.
Derek: Plus the cost of the powers of service relative to the overall cost of the data center I'm just trying to help alleviate concerns of a future power pricing war is more megawatts to enter the market with new players just maybe some helpful context around that.
Derek: I think first and foremost we alluded to it in our Colorado.
Derek: Call it in the prepared remarks.
Derek: Our solution today is very competitive with the real competition, which is great.
Derek: We're not saddled our solution and our customers are not saddled with the inflationary pressure in bringing the grid into the ditch.
Derek: Current sort of 20 <unk> century.
Derek: We we are looking at a structure, where our customers can have clear visibility into the cost of the equipment for a long duration and the only sort of input they've really got to manage change on the fuel side. So natural gas prices. So I think our customers see our solution is having more.
Derek: Sustainability more consistent view of what the total cost of ownership relative to agree that we expect to see significant inflationary pressure. So I think that's that's sort of how we contextualized.
Derek: And adding to that would be the effect of backup nature of having this equipment right next to your building versus having to rely on the AR and the utility. So I think there is an embedded if youre going to build one of these and why I believe youre going to spend a lot of capital and money designing a backup system here you have quite a bit of that embedded in the direct.
Derek: And behind the meter power and I think the third piece of that would be just the nature of this meeting today, our fleet and is obviously pretty heavily weighted towards the data center world, but when we look at the themes of reissuing manufacturing and just industrial growth in general here in the U S. There are many end markets that are likely to be short power and so this is a.
Derek: A very large secular theme that's not predicated on just simply one macro outlet.
Derek: Alright that makes sense I guess that leads into my next question kind of around customer concentration concentration wrestling with this one key customer with a data center, obviously, the multi year contract and the JV derisked that but are you in conversations with other hyperscale or I mean should we expect to see.
Derek: Our new data center contract with a different customer from you guys with this available megawatt capacity that you have starting in the back half of next year.
Derek: We have numerous ongoing conversations both with large industrial complexes that are short power as well as data centers, and so you know, which which one of those ends up with.
Derek: With a piece of the power the next power and there is potential expansion beyond that but as we look at the world is data center, driven or an increment, but I will tell you that we're having lots of conversations with heavy industrial type activities that need the power of this is Pat.
Derek: Got it very helpful. I'll turn it back thank you.
Derek: Okay.
Derrick Whitfield: And the next question will come from Derrick Whitfield with Texas Capital. Please go ahead.
Derrick Whitfield: Good morning, all and congrats on the quarter and your JV announcement.
Speaker Change: Thank you Sir I have to.
Speaker Change: Two questions for you guys and they're both related to your power solutions business.
Speaker Change: First regarding the 450 megawatts of UN contracted capacity, how aggressively we look to market that given the tightness in the market dynamics for behind the meter solutions.
Speaker Change: I mean, we're adding lots of several active discussions and I don't think there's a need to to get overly impatient with it as we see it and as were putting money down toward the acquisition of that we're not out of a lot of cash at this point relative to the timing of doing that I think we will see that evolve and I think the quarter is that it will.
Speaker Change: More than likely be at a similar kind of tenure if not longer.
Speaker Change: On track and I think that's where the market's evolving with this in a piece of that order is mobile one of the pieces of that order is modular.
Speaker Change: And yet the timing of it is you know 12 plus months out from a delivery standpoint, so a lot of time under the curve available.
Speaker Change: Terrific and then on the second question and thinking about some of the announcements from majors, including Chevron and Exxon Mobil, how important are lower emission solutions to your data center customers.
Speaker Change: I think it's a mixed bag I think if you if you look at what we're doing on the <unk>.
Speaker Change: Permanent if you will power plants, we're adding an even stuff with little shortage or we have acquired them and have a nice backlog of SCR is to go with us to drop the drop the emissions profile to a very acceptable and sub two ppm level and.
Speaker Change: And we start off even with the mobile versions of this are.
Speaker Change: Caterpillar solar equipment, and sub 90 ppm with their solenoid technology at a pretty low spot even in the shorter term applications. So I think we feel comfortable with the emissions profile of this equipment.
Speaker Change: Fairly state of the art relative to that relative to the market.
Speaker Change: Great. Thanks for your time.
Speaker Change: Yeah.
Speaker Change: The next question will come from Jeff Labonte with T. P. H. Please go ahead.
Good morning, Bill and team. Thank you for taking my question.
Speaker Change: I just wanted to ask around the dynamics of the order itself and how your relationship with the L. A and led to this.
Speaker Change: That quota capacity 30 at night, but it seems to imply that it's so large new offerings also curious to see how much this disorder, representing up their largest capacity moving forward. Thank you.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: <unk> spent a lot of time with solar in reviewing this product line.
Speaker Change: This is a new product for solar.
Speaker Change: Have their first deployment actually go into another data center in Texas with subsequent deployments just a couple of other customer. So we're not the first the first Guinea pig it out of the order here, but we are I would suspect the largest buyer of those units at this point in time.
Speaker Change: So that's a product that we've got great visibility and it's a you know as I alluded to it's got a superior heat rate to.
Speaker Change: Some of the other products on the market it's.
Speaker Change: It's incredibly robust very dense in terms of footprint per megawatt.
Speaker Change: And so we're really excited about having that on this new data center, our customer is really excited about it as well.
Speaker Change: And so we look forward to continue to develop that relationship with solar and we spent a lot of time with them and on the puts and takes.
Speaker Change: Our sort of feedback around all of their equipment given the significantly.
Speaker Change: <unk> relationship that we have here in this company, but there's also a significant duration in a relationship that extends far beyond the history of Solaris being in.
Speaker Change: In the power space with the team that we brought in the <unk> acquisition.
Speaker Change: Alright, thanks for the color I'll hand, the call back to the operator. Thank you.
Speaker Change: Thanks.
Speaker Change: The next question will come from Thomas <unk> with Janney Montgomery Scott. Please go ahead.
Speaker Change: Good morning, gentlemen, thanks for the time.
Speaker Change: Couple of questions for me I start with with what Youre seeing on voltage variability specifically on the chips I think everyone knows how.
Speaker Change: Holly variable that voltage can be so I'm curious, what you're doing to help customers deal with that.
Speaker Change: The power delivery standpoint, and just how that kind of fits into your company ethos of being a service provider and helping drive efficient operations and then a few follow ups after that.
Speaker Change: And our job as a supplier is to is to get our customers with the best service to start looking for and we work very closely with them dealing with things like new new new deployments of different types of chips and the technology and I think that that evolves in a spirit of working together with your customer resolving all those challenges and however, they come up with what.
Speaker Change: It's the combination of of our batteries are ups's or how you run the equipment or how you back it up but there isn't one particular solution to any of them, but I think that that that part of that business. Our customers' business is in our business, but we are evolving how we make sure that it runs.
Speaker Change: Runs well and runs as as reliably as possible.
Speaker Change: Ongoing an ongoing effort and it's live and I think it speaks to the nature of the distinction that we continue to try and emphasize which is this is power as a service.
Speaker Change: Emphasis on the word service.
Speaker Change: <unk>.
Speaker Change: Power is available as an offensive.
Speaker Change: Folks with capital can go out and secure capacity, but delivering the solution with the service does take a significantly.
Speaker Change: Different business model with different competencies and different cultures, and we've got a great Foundation in the Soliris logistics business as far as the culture of reliability and performance for customers with equipment and service and so this is just a natural extension for us with different challenges and we've got a great problem solving culture.
Speaker Change: Across the board.
Speaker Change: And then at.
Speaker Change: ERCOT has about 20 gigawatts of large load trying to interconnect by the summer of 2007. According to the latest Ctr and I'm curious how you look at that bucket of load with respect to.
Speaker Change: Quote unquote converting to behind the meter power.
Speaker Change: And just you know you've got a bucket of.
Speaker Change: Opportunities that you're chasing kind of obviously it is but just how do you think about the possibility of some of those switching to give you a solution for instance.
Speaker Change: Well I think some of them clearly will I think some of the announcements that.
Speaker Change: Ive already pointed that direction out there I mean, we're not we're not heavily weighted to ERCOT right now and so we'll we'll address those and Theres clearly pipeline opportunities that are in ERCOT. So I think each each location is a little bit different H H.
Speaker Change: System, operator has some really different set of characteristics in each customer has a whole different set of characteristics and so as we as we match up what we do.
Speaker Change: As the powers of service and match that with our customers' needs I think we'd want to make sure. There's a good fit there.
Speaker Change: I think it's a there's a lot of noise and a lot of talk in there sometimes maybe the same the same particular mode, maybe talked about four five times and is only one particular person that ends up doing it and so I think where we're very careful and selective about how we weed our way through a market that does have a lot of talk and hype around it.
Speaker Change: I'm going to make sure that we're at the right level at the right place with the right service.
Speaker Change: And then last one for me and then I'll turn it back just on emissions he talked about it a couple of times. So far on the call. Just how are you helping customers with EPA clean Air Act permits specifically, whether it's through your technology that you have with Phil are you given the the Nox emission.
Speaker Change: Right there or.
Speaker Change: Logistically just kind of navigating the requirements or are you helping out in any way there's an uplift.
Speaker Change: Yes.
Speaker Change: Every customer is different we will roll up our sleeves and generally you bring in a specialist environmental consultant to help you with those applications kind of industry wide and so we'll work with the customer providing.
Speaker Change: The engineering and the design work of what we're delivering and help that will feed into the permit that theyre generally responsible for but where there is a support role in ensuring that all everything is accurate and tied together for the for the whole units.
Speaker Change: Okay.
Speaker Change: And our next question will come from Sean Mitchell with Daniel Energy Partners. Please go ahead.
Sean Mitchell: Thank you and congrats on the on the deal I think you guys Bill or just working with turbines today would you guys ever consider moving into some of the larger gas receipts to support you are behind the meter solution or are you going to stick with just turbines.
Sean Mitchell: Yeah, and remember we operate a fleet of about 30 megawatts of small generation today and reception.
Sean Mitchell: Yes from a starring motor perspective, I think we probably have another.
Sean Mitchell: 10.
Sean Mitchell: Eight to 10 megawatts of stock.
Sean Mitchell: <unk> Motors and the 500 to 750 megawatt size and I think we'll continue to see that we're studying hard how you pair these up in various load profiles and various environments altitude matters temperature matters.
Sean Mitchell: You know each have a good fit for the marketplace and right now our focus has been on the more dense power solutions with a lot of it but I think there will be opportunities where you may look at how we are.
Sean Mitchell: How we maybe combine turbines with with large receptor or maybe there's jobs that we won't look at that that may be more suited for them.
Sean Mitchell: My back of gas fired resets.
Speaker Change: Got it and then maybe one more for me just as your issue.
We've heard a lot about how fast you have grown there.
Speaker Change: As you is it going to take some time to absorb the kind of current order are you going to be out kind of.
Speaker Change: Our digest the current order.
Speaker Change: You're going to be actively pursuing similar deals for 2007 and beyond or kind of how should we think about that.
Speaker Change: I mean, we are the good news is this is spread out in the horizon.
Speaker Change: We look at this.
Speaker Change: We are very confident that we can have all the rest of the balance of plant tied up and we can ensure that we've got the right.
Speaker Change: Engineering and operations staff to actually run this equipment in the configurations that were looking for so one of the one of the benefits of having larger installations and of course the megawatt per.
Speaker Change: Per operator goes down if you will because youre, having a set of operators at one particular site versus them running around the 20 different sites. So theres a lot of value in that for us.
Speaker Change: And going forward, but there is opportunities to do things beyond this and I think week.
Speaker Change: We find and manage each constraint were going to find opportunities to continue to grow and maybe.
Speaker Change: Beyond what we have today.
Speaker Change: With similar kind of extend tenor and economics.
Speaker Change: Got it thanks for taking my questions Congrats again.
Speaker Change: The next question will come from David Smith, with Pickering Energy Partners. Please go ahead.
David Smith: Hey, good morning, and thank you for taking my question.
Speaker Change: Okay.
Speaker Change: So I'll reiterate the congratulations on the new orders on the stunning success of Europe, and we've been to power.
Speaker Change: Lots of good questions asked already I just had a quick one to help calibrate our model.
Speaker Change: I apologize if you gave these details and I missed it but wanted to make sure I understood the improvement.
Speaker Change: For Q1 deployment and S. P S.
Speaker Change: Last quarter I think the expectation was for an average of 300 megawatts deployed in Q1.
Speaker Change: It's 360.
Speaker Change: Could you indicate how much about increase relates to accelerated deliveries versus.
Speaker Change: And third party equipment.
Speaker Change: It's a mix of both so we were able to pick up some earlier deliveries.
Speaker Change: The one <unk> at the end of 2024.
Speaker Change: We've been able to get those out to the customer which has driven.
Speaker Change: An increase in Q1 activity and you're correct, we have picked up.
Speaker Change: Some third party equipment from folks that you don't have them.
Speaker Change: Available generation, but not necessarily the contracts or the business model in place to support the operations that we're providing.
Speaker Change: The power as a service model. So we have opportunistically been able to pull forward.
Speaker Change: Ultimate demand Thats long term demand for us by bringing in some third party units, which will ultimately be replaced with our own units, which obviously will add incremental economics for us.
Speaker Change: Great. Thank you very much.
Speaker Change: Again, if you have a question. Please press Star then one.
Speaker Change: Our next question will come from Don Crist with Johnson Rice. Please go ahead.
Don Crist: Good morning, guys.
Speaker Change: One question for me almost everything has been asked already but we hear from a lot of different companies that are providing turbines to the market that if you place an order today it would be about 36 months for delivery.
Speaker Change: Was there something that Joe had a relationship or or something of that nature that allowed you to get the new water kind of quicker than that and if you placed another order today would it be closer to that 36 month level.
Speaker Change: I think the word that we've used is bolt.
Speaker Change: We have moved forward efficiently quickly we've got a culture of.
Speaker Change: Decision, making that allows us to be in a position to make decisions efficiently.
Speaker Change: And so all of the orders that we placed.
Speaker Change: They have not been.
Speaker Change: Protracted opportunities they are available and we've gotta be bold and decision, making to say, we're going to step up for those orders knowing the visibility that we have from a demand standpoint, so it's a combination of that.
Speaker Change: The decision, making approach as well as visibility into the market.
Speaker Change: And what we've got from feedback from customers.
Speaker Change: So I think when people talk about 36 month lead times I think those are probably larger turbines and nature of that sort of frame engines that you might see in a in a large combined cycle plant, but when we look at.
Speaker Change: Look at the sizing of turbines instead of a correlation between them.
Speaker Change: Meantime in size, so the larger units and I'm talking multiple hundred megawatt units they have more likely a three to four year kind of lead time and as we look at the spot that we're in today, it's more of that 12 to 18 month timeframe.
Don Crist: And Don you guys ask questions.
Speaker Change: This is starting to feel very lonely its evidenced fantastic quarter.
Don Crist: [laughter].
Don Crist: I'm sure.
Don Crist: One final question the 32%.
Don Crist: Highlights that is contracted today, but you're in negotiations on that would you expect that to be contracted under a certain time frame maybe the next six to nine months or so or do you think it's going to take longer than that.
Don Crist: Oh, I think it's going to happen well within six to nine months.
Don Crist: Okay I appreciate it everything else has been asked.
Don Crist: Same time.
Don Crist: With no further questions. This concludes our question and answer session.
Bill Zartler: I'd like to turn the conference back over to Mr. Bill <unk> for any closing remarks.
Bill Zartler: Thank you and thank you everyone for joining us today, we're obviously off to a strong start in 2025 and our entire team is excited about the growth opportunities for the company I believe we have the right business with the right people and culture that will help us continue to deliver value to our shareholders I'd like to thank all of our employees customers and suppliers for their continued partner.
Bill Zartler: Ship, making soliris a success. Thank you all and we look forward to sharing our progress with you in a few months.
Bill Zartler: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Bill Zartler: Okay.
Bill Zartler: [music].
Bill Zartler: Yes.
Bill Zartler: Yes.
Bill Zartler: [music].
Bill Zartler: Okay.
Bill Zartler: [music].