Solaris Energy Infrastructure, Inc. Q2 FY2025 Earnings Call

Good day, and welcome to the Solaris Energy Infrastructure, Inc. Second Quarter 2025 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Yvonne Fletcher, Senior Vice President of Finance and Investor Relations. Please go ahead.

Thank you, operator. Good morning, and welcome to the Solaris Second Quarter 2025 Earnings Conference Call. Joining us today are our Chairman and CEO, Bill Zartler; and our President and CFO, Kyle Ramachandran. 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. Please refer to our press release issued yesterday, along with other recent public filings with the Securities and Exchange Commission that outline those risks. 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. I would 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. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are available in our earnings release, which is posted on the News section of our website. I'll now turn the call over to our Chairman and CEO, Bill Zartler.

Thank you, Yvonne, and thank you, everyone, for joining us this morning. Solaris delivered strong second quarter results across both business segments. The second quarter marks the third full quarter since introducing our Power Solutions business. We continue to grow our Power Solutions business and generate significant cash flow from our legacy Logistics Solutions business. The continued integration of the business lines demonstrates the complementary strengths of both our people and our businesses. I'll begin with an update on our Power Solutions segment. During the quarter, we added capacity with current customers and introduced new customers to our offering. If we look back to 10 months ago, when we acquired Mobile Energy Rentals, they were operating approximately 150 megawatts. Today, we have over 600 megawatts working for 6 different customers. Additionally, we have contracts in place with many of these customers and others to further accelerate our activity over the course of the next several quarters as we take delivery of previously ordered new generation capacity. As a result of this commercial momentum, we are servicing an increasingly diverse set of end markets. These include microgrids focused on energy production, gas processing plants, shorter-term utility grid resiliency efforts, including synchronization with the grid to provide additional power to a customer, and data centers supporting artificial intelligence applications. Our commercial opportunities span various industries with multiple customers for projects totaling several gigawatts of opportunity. Customer feedback thus far indicates that our modular and reliable power generation equipment, coupled with its favorable emissions profile and other unique operational benefits, provide us with a competitive edge in these opportunities. Market demand for power generation continues to accelerate as the confluence of the electrification-of-everything theme, artificial intelligence power needs, and the reshoring of manufacturing unfolds which, in our view, is likely still in its early innings. The grid continues to be challenged to address these needs, considering both time to power as well as the complex nature of the size and, in the case of artificial intelligence application, variability of the load demand that is being introduced. Reliability is critical to our customers. We consider modular, power-dense generation uniquely capable of addressing this requirement, as operational risk is distributed across multiple, appropriately sized nodes, creating layers of redundancy. For instance, a robust microgrid may integrate multiple small or mid-sized turbines with grid power or large frame turbines, potentially supplemented with energy storage solutions like batteries. We believe this hybrid structure delivers optimal redundancy, with greater inertia and spinning reserve capacity, enabling high reliabilities. Modular generation also allows customers to scale their power capacity in increments, as needed. Large-scale microgrids, particularly for artificial intelligence computing applications, rarely require full peak power from the outset. Modular power solutions offer an effective strategy to synchronize the growth of the power supply with the growth of the data center load until reaching full data deployment, while continuing to provide additional layers of redundancy via spinning reserve capacity at scale. The regulatory backdrop has offered recent clarity in support of our distributed generation solutions, for example Senate Bill 6 in Texas, which was recently signed into law. The new law requires enough co-located generation for large demand loads so that they can be self-sufficient off the grid. We have observed that this regulatory clarity is creating numerous potential commercial opportunities as industry participants continue to acknowledge the reliability that our solutions can provide, both directly to the customer, but also to the broader power supply, transmission, and regulatory ecosystem. Our current power solutions, which include both turbine and reciprocating generation, deliver benefits such as reduced time to power, low emissions, high power density, and operational reliability. By maintaining a generation-agnostic approach, we can tailor combinations of power solutions to best meet the specific needs of each project. We are also focused on strengthening our business by evaluating adjacent opportunities that complement our core offerings. As a recent example, our engineering, manufacturing and operations teams collaborated to design and implement modifications to Selective Catalytic Reduction systems, or SCRs, to make those systems more mobile. This enhanced mobility enables more efficient assembly and equipment placed on site is expected to reduce operational downtime on location. The installation of these modified SCRs began 2 months ago on our initial data center project, and implementation is going quite well. These proprietary modifications also enabled us to significantly accelerate the commissioning of the SCR units, highlighting another benefit of leveraging our organizational agility that is core to Solaris' DNA. When paired with our already low-emission turbines, these enhanced SCRs will support customers in achieving an attractive emissions profile at the site. Another example is that we have recently utilized our in-house software and technology expertise to develop an in-house app called Solaris Pulse to enable the centralized, fingertip remote monitoring of our power generation, enabling efficient operation and maintenance of our equipment. We are also focused on other balance of plant equipment as systems that are critical to providing power to our customers in the form they require. This can include transformers, switchgears, breakers, and wiring. We've collaborated with several partners to offer customized balance of plant solutions to manage our customers' complex loads and are exploring ways to further integrate this capability in-house. We believe this turnkey approach, providing both an optimal source of generation as well as bespoke balance of plant solutions, is an opportunity for us to further differentiate our power as a service offering. We believe we are well positioned to add value to our customers and grow both organically and inorganically. Turning to our Logistics Solutions segment. The investments we've made in our systems have helped us drive further frac efficiencies for our customers and end users, which in turn has enhanced earnings and cash flow for Solaris. Our silo systems, when combined with a top fill, can help our customers process large volumes of sand in support of simul-frac and trimul-frac completions. As an example, we are currently working on a pad for a major E&P operator where we have 12 silos and 2 top fills on a leading-edge completion design job using trimul-fracs. Financially, this has had a meaningful impact on Solaris. When our Logistics Solutions business started, we offered one piece of kit, and we earned about $1 million of profit per frac crew on an annual basis. Now, our leading-edge job has 4 different equipment systems earning closer to $4 million of profit per frac crew annually. Structurally, we see a continued reduction in the number of active frac crews required to keep oil and gas production flat. To achieve these efficiencies, each crew will be asked to do more, and we believe our equipment is designed and built to help deliver those efficiencies. While activity during the second half of the year is likely to slow down further due to the recent softness in oil prices, we believe that we remain well-positioned to maintain or grow share as completion intensity continues to rise. With this business in cash generation and harvest mode, we believe the segment will continue to generate significant free cash flow. In summary, we are pleased with both the operational and commercial advancements achieved during the quarter. We are confident that we are establishing a robust and distinctive business positioned for continued growth and future opportunities. With that, I will turn it over to Kyle.

Thanks, Bill, and good morning, everyone. I'll begin this morning by providing a review of our quarterly results, an overview of our updated guidance and outlook, and a recap of recent financings and our current liquidity. During the second quarter, Solaris generated total revenue of $149 million, which reflected an 18% increase from the prior quarter due to continued activity growth in Power Solutions which more than offset a modest decline in Logistics Solutions activity. Adjusted EBITDA of $61 million represented a 29% increase from the prior quarter. Power Solutions contributed 67% of our total segment adjusted EBITDA and remains on track to deliver more than 80% of our total segment adjusted EBITDA after our on-order fleet is deployed. During the second quarter, we formed Stateline Power, LLC, a 50.1% Solaris-owned joint venture with an existing data center customer to co-own and operate approximately 900 megawatts at a single site. Adjusting for the 49.9% of non-controlling interest in the JV, adjusted EBITDA attributable to Solaris shareholders was approximately $62 million. While our results are reported on a consolidated basis, which includes 100% of the JV, we believe that adjusted EBITDA attributable to Solaris shareholders is an important metric for the investment community and our shareholders, and we plan to provide this additional profitability measure going forward. Turning now to our segment results and outlook. During the second quarter, the Power Solutions segment generated revenue from approximately 600 megawatts of capacity, an increase of greater than 50% from the prior quarter. This increase was driven by increased demand from our customers, which we are meeting using a combination of new equipment deliveries as well as selective short-term sourcing of third-party power generation capacity. For the third quarter of 2025, we expect activity as measured by average megawatts earning revenue to be at least 600 megawatts. Segment adjusted EBITDA for Solaris Power Solutions was $46 million, a 43% increase from the first quarter. Our order delivery schedule for the remainder of 2025 reflects fewer new equipment deliveries before picking up again in the first quarter of 2026. This drives our expectation for segment adjusted EBITDA contribution over the next 2 quarters to be modestly higher. Additionally, we benefited in the second quarter from project start-up and commissioning revenue that was pulled forward due to the acceleration of capacity that are unlikely to repeat at a similar magnitude in any single quarter. In our Logistics segment, we averaged 94 fully utilized systems, a decline of 4% for the first quarter. We expect continued oil price softness to drive lower drilling and completion activity. While we are evaluating opportunities to continue to drive new customer additions, the expected decline in market activity levels results in a forecasted fully utilized system count down approximately 10% to 15% for the third quarter with a slightly more pronounced decline in segment adjusted EBITDA due to the impact of fixed cost absorption. Netting these factors and considering corporate and other expense results in total company adjusted EBITDA guidance for both the third and fourth quarters of $58 million to $63 million, relatively flat from the second quarter, driven by some continued growth in Power Solutions, limited benefit from start-up and commissioning activities and a lower Logistics Solutions outlook. For more details on the guidance and other corporate modeling items such as interest expense, depreciation, amortization, tax rate and share count, please refer to the Earnings Supplement slide deck published on our website. Turning now to a recap of our financing activity during the quarter. Solaris raised $155 million in the form of 4.75% senior convertible notes due in 2030. The proceeds from this financing, combined with operating cash from non-JV activities, are expected to cover the company's remaining capital expenditure commitments. On behalf of the JV, we closed a $550 million senior secured loan facility and subsequently drew an initial funding of $72 million. This facility is expected to cover all remaining planned JV CapEx needs to deliver and stand up at stated capacity of approximately 900 megawatts. The flatter delivery scheduled during the second half of 2025 also coincides with fewer required Solaris-only progress payments for our order book over the next 2 quarters, which will result in a moderated CapEx profile during the second half of the year in advance of final payments of equipment in 2026. We are excited about the expanding opportunity set available to Solaris. Our continued priority is to deliver strong returns on invested capital as we continue to develop our Power Solutions business while sustaining strong cash flow from our logistics operations. With that, we'd now be happy to take your questions.

The first question comes from Stephen Gengaro with Stifel.

So what I wanted to just ask for a little more detail on was the 600 megawatts that you kind of averaged operating in the quarter versus kind of what you actually own right now and maybe understand sort of how we should think about that dynamic over the back half of the year as you kind of work to meet your customers' needs?

Yes, Stephen, we were able to source some additional capacity to meet customer demand in the second quarter through some third-party resources that through the MER relationships. We continue to benefit from those relationships. But as we look forward to the second half of the year, we do have some of our deliveries coming in. And as those deliveries come in, some of the re-rented assets will phase out. And so you can kind of see that in the guidance that we provided here today, where we've got a sort of flattish outlook for total megawatts working, but we've got a bit of an expansion on the effective dollars of EBITDA per megawatt in the guidance. And as we look forward to '26, we'll continue to see that work its way through as the fleet gets fed up of our own capacity and some of this third-party assets get tapered off. I think as we look at our order book going forward here, we've got best-in-class units coming off the line here with the best emissions profile of any sort of OEMs. And then we've coupled them now with the SCRs on the first data center site. And that, as we alluded to in the call, is going very well. And so our fleet, we're really excited about the expansion of our fleet. We were able here in the second quarter and the second half of this year to benefit from some third-party assets. But as we roll out our fleet, we really think we're delivering fit-for-purpose equipment here that's going to be able to meet the necessary emissions profiles for this equipment to be out on location for a very long period of time, operating at very efficient levels. So that's sort of how we see the evolution here in the second half and going forward.

That's helpful. I want to clarify something; it seems that the owned assets likely generate a higher EBITDA per asset deployed per fleet, as you mentioned. Can you tell us what the owned capacity was at the end of the quarter?

Yes. I think it's going to be a little bit difficult quarter-over-quarter here as we take deliveries of our owned assets to get too granular without losing the force for the trees. What I would say is we will continue to see the sort of 3- to 4-year paybacks on our owned capacity, and that's reflective of the true underlying economics of the capital investments that we're making. And it's going to work its way through the effective EBITDA margin as the re-rents come off. And so without getting too far into the weeds here, I think what we've indicated here today is an expansion in EBITDA profile per megawatt in the second half of the year as our deliveries come in.

The next question is from Dave Anderson with Barclays.

So, regarding your capacity, I understand that much of the focus has been on securing the remaining capacity that will come online in 2027. I'm interested in whether you have plans for additional capacity beyond the 1.7 gigawatts you will be operating. How does the current queue look for placing additional orders with OEMs? I know Baker Hughes mentioned plans to double their capacity of Nova LTs, and I'm not sure how that aligns with the equipment you're using. Additionally, I'm curious about third-party power capacity. Is that something you might consider for M&A, or does it not fit your requirements? I would appreciate any insight into your capacity plans beyond what you've already outlined.

We are always assessing whether to buy or build based on the asset quality, their age, and our specific needs. We are pleased with our current mix and the order book. Looking ahead, it’s true that the lead time for new equipment orders has been extending. Therefore, we are considering our next steps, which need to be aligned with particular project requirements before we place additional equipment orders.

And on the M&A side, does that make sense or no?

Yes, I summarized it from the build versus buy perspective. Power generation equipment is not only widespread, but there is a notable difference in quality, maintenance costs, and emissions. All of these factors influence our decisions regarding the specific assets we prefer to operate.

The next question is from Scott Gruber with Citigroup.

So just following on the questions on the second half. 4Q EBITDA broadly flat here. I assume there's a bit of improvement on the power side as you continue to have your owned equipment delivered, but that would imply just a modest decline in logistics in 4Q to keep the overall EBITDA flat. Is that the right read here that the logistics decline is just modest in 4Q?

Yes, that's accurate. We are facing some ongoing activity challenges as we look ahead to the second half, particularly in the fourth quarter. However, it's important to note, as we mentioned in our prepared remarks, that the Solaris Logistics segment continues to excel in advanced completion design and well intensity. We touched on this during the call regarding the capital we're investing in leading-edge job sites. Our guidance reflects a broader trend in frac activity, but we're still well-positioned in that business with capital ready to deploy and minimal startup costs remaining. While there are growth opportunities, we've adopted a conservative approach in the guidance shared today. Nonetheless, we believe this business unit can continue to gain market share as job designs become increasingly demanding.

I appreciate that, Kyle. And then we recently saw another company secure a 10-year power supply agreement for a microgrid in the Permian. You have a few microgrid contracts in the oil and gas space, and obviously, a lot of good relationships. Just can you provide some color on what you're seeing in oil and gas for microgrids and how the Ts and Cs of those contracts, pricing, duration compared to what you're seeing outside of oil and gas and data centers and elsewhere, and just your appetite to build that side of the business as you continue to grow your Power Solutions?

If you think about the oil and gas market that we're serving, it's the production end of this, it's the gas processing end of that. It's a bit of microgrid for those things. We're not out providing power for the frac horsepower where it's very mobile and we're moving around. So we're building stable microgrids. Those customers' credit qualities are just as good as some of the data centers, if not better, in certain cases. So I think we view those customers as great customers. The tenure, the pricing of it is relatively similar, and we know them. And it is a little bit of our comfort zone in dealing with those end markets because we know the players all the way up to the top of all of those organizations and have built good relationships. And they trust us to do this for them as we've done this for them in the frac business as well as now being able to provide that same thing on power and having a resume and history of actually executing and executing with high reliability for them in the market. So we are relatively customer agnostic. It's all about pricing and tenure and the location and how well it is for us to serve that. And so we do like that business as well as the data center market.

And one little anecdote I would add on top of that is, clearly, we're seeing all the upstream companies, all the midstream companies looking to play a significant role in the data center build-out as well. And so I think we're looking at it as building relationships with multiple parties across multiple industries that all are driving around the electrification-of-everything theme. And I think whether you are a producer of molecules in the upstream world or you are a mover of molecules in the midstream world, you're looking at the data center as a pretty attractive end market. So if we're building relationships with the folks that are ultimately going to play a bigger role in the data center build-out, it can be quite accretive as we look at the strategic development of our customer base over multiple years.

The next question is from Derek Podhaizer with Piper Sandler.

So I noticed on the presentation, it looks like you added about 70 megawatts into the energy market. Maybe could you expand a little bit on where those went to, kind of the terms and payback with those? Maybe what type of kit? Are they the smaller 5.7 turbines or maybe some of the bigger ones? Just maybe some color around that.

Thanks, Derek. You made a good observation regarding the details. We entered the energy market with an existing customer, a high-quality, large midstream operator. This is a relationship that we continue to strengthen through significant synergies. We have performed well for them, and they continue to view us as their preferred partner. While the duration of this contract is not the same as our longer data center agreements, the pricing is more appealing. As Bill mentioned, it represents a trade-off between duration and returns. We are also in advanced discussions with multiple parties regarding hundreds of megawatts of opportunities for large data center expansions. The timelines for these projects differ from some immediate responses we see in the Permian Basin, where infrastructure delays are affecting grid connectivity. This situation influences the decision-making process. Importantly, even with the 60 megawatts we allocated to the energy sector, we still have ample capacity available to meet the demands of larger-scale data centers. We are currently managing our capacity strategically, balancing between utilizing it and holding it back for those ready to make decisions.

Yes. No, that makes sense. Appreciate the color, Kyle. Maybe just kind of a follow-up to that. I think you have about 450-some-odd megawatts uncontracted, so maybe just asking about that. When do you think we should get an announcement as far as the next data center contract? And will that be with a different customer than your customer today?

Well, I think it's always difficult to predict specific timing. What I would say is, our conversations are all going very well, multiple parties. We are oversold from a discussion perspective, not from a contracted perspective quite yet. So we're working through those steps, and we're seeing broadly continued acceleration. Certainly, a lot of news coming out of Pennsylvania last week on a very macro basis. SB 6, as we alluded to on the call, that's driving discussions as well. What we're seeing is continued momentum around people recognizing the benefit of our modular, scalable unit construction to support the ramp-up in the data centers. And then at the point with which they've really reached full build-out, there's significant benefit in having this dedicated generation available even in the context of getting significant grid power. And so I think folks are slowly but surely coming to realize that this hybrid solution with both our island mode, modular, scalable solution with superior emissions profile, coupled with grid interconnect is really probably the best way to manage the high degrees of reliability that are required in a very efficient capital way.

The next question is from J.R. Weston with Raymond James.

Just building off of some of the prepared remarks and kind of the opportunity there to add equipment and services and Power Solutions. Just as you kind of deepen the relationship with the customers and provide more of a bespoke Power Solutions offering there, how does it kind of inform the conversation on the longer-term value proposition and kind of the overall positioning of the business?

Sure. Customers are seeking highly reliable power to meet their needs. When choosing their ideal solution, they consider pricing and the level of control they desire, particularly since maintaining power is crucial for their operations. As Kyle mentioned, we start with the fundamentals. We believe the solution involves pairing small to midsized turbines with grid power, typically including a battery system to manage the load variability from data demand. Additionally, large-scale units can be integrated to create a custom power plant tailored to specific load profiles. Strategically, this is how we see things evolving.

Yes. I appreciate that. And just one more for me, kind of again, building off of some of the questions earlier, more about kind of the queue here and fleet additions and build versus buy. But just kind of as you think about the longer-term objectives of the company and kind of maybe if and when the EBITDA guidance is achieved, how would you then look at kind of the free cash generation potential of that phase of the business? And how do you think about kind of the dividend versus maybe opportunistic or more ratable fleet growth in that phase of the business?

We've experienced various cycles with several of our businesses, including our build, mining, and cash flow operations. We have learned when to invest for attractive asset returns versus when to allocate funds for shareholder returns. Looking ahead, we anticipate making these decisions within the next year, and we’re confident in our ability to make thoughtful choices. Our track record shows we successfully return cash to shareholders while also determining the right moments to reinvest that free cash flow into building business opportunities that benefit shareholders. Although it's premature to make definitive decisions now, we are attentive to these factors and will strive to make the right choices when the time comes.

The next question is from Jeff LeBlanc with TPH.

I believe in the prepared remarks, you mentioned that you don't expect the Q2 capacity acceleration to repeat. Is this a function of your customers' development plans, your equipment delivery schedule or the ability to procure additional third-party capacity?

Well, quite frankly, it's probably a combination of all. And so yes, as I alluded to in the second quarter, the demand was greater than we anticipated, and we were able to sort of meet that in a very timely way. So one of the things that we've proven, I think, across the history of this business is to be a very nimble group that can see the sort of the plays happening on the field and react. And so we've done that in multiple instances. And I think certainly, the earnings contribution in the second quarter with respect to being able to deliver quickly, that was a big driver for us. And as we look forward, we talked about it on the prepared remarks, I think the SCRs and our ability to take a third-party manufactured piece of kit and really custom tailor it to the job location and hit a timeline that was far more accelerated than the OEM thought we would be able to do. We really drove that through ingenuity and using some best practices that we've developed over the years. And I think we're going to continue to find ways in this business. I think we've unlocked significant option value in this business, and we're going to continue to see that unfold. It's hard to predict exactly what those options, how they're going to pay out. But I think we're finding multiple ways to win here, and we'll continue to see those opportunities.

And then I guess along the same lines, I think in the prepared remarks, you also mentioned a generation-agnostic approach to meet the customers' needs. Can you talk about the challenges related to integrating multiple types of technologies together and how we should be thinking about that moving forward?

The team of engineers we have from MER is very experienced in transforming power and understanding what that entails. Our legacy business included a significant amount of reciprocating generation, and as we take on some of these projects, we're pairing large-scale, approximately 2-megawatt reciprocating systems with our turbine business to build a diverse setup for generating power. We currently operate a combination of three different types of solar turbines alongside three GE turbines at one data center site, and we anticipate that the next site in the joint venture will also feature a range of equipment. This versatility is one of our advantages as we develop our business around our technology and application, enhancing our control over these systems. It's a key part of the competitive edge we're establishing in our operations.

The next question is from Nate Pendleton with Texas Capital.

Congrats on the strong quarter. With my first question, while I understand that the permits for longer-dated power generation are typically the responsibility of the host facility, can you talk about how much of your data center fleet today have those permits in hand?

Well, I think the way I would describe it is, yes, you're correct. Generally speaking, it's the owner of the land, if you will, the owner of the job site that's going to be responsible for that permitting process. We certainly play a role in that in supporting the assembly of that permit because it's going to include lots of granular details about the equipment that will be on site. And so the permit will specifically detail exactly what equipment is there, which obviously is good from our perspective because it sort of ties us together indirectly to the permit. With respect to where we're operating today, we are on 2 data centers. The first data center has received its Title V air permit and then the second one is in process.

Got it. I appreciate the color. And for my follow-up, regarding the Logistics Solutions business, it looks like activity is projected to drop a bit in Q3 as broader activity has softened. Are there any operational levers or efficiency initiatives that the team is looking at to mitigate some of the impacts there?

Yes. Ensuring that we manage our fixed costs is a daily focus for us. We are aware of the importance of fixed cost absorption and are paying close attention to it without compromising the quality of our business. Reliability and safety remain our top priorities for all our customers in both segments, and we are committed to maintaining those standards while also focusing on delivering the right margins.

The next question is from Michael Dudas with Vertical Research Partners.

Bill, in your prepared remarks and discussion, you cited the Texas legislation. Certainly, the news out of PJM last week, again, continue to be surprising to the marketplace. Any thoughts on Big Beautiful Bill or how your clients and how your negotiations are maybe starting to get a little bit more clearer and accelerated given some of those dynamics, certainly in the power side, but maybe even on the energy side from your view?

Yes, I believe the power markets are now beginning to reflect the actual pricing for firm power, which has been influenced by the renewable aspects of the business. The PJM auction has highlighted the true costs associated with reliable and baseload power. As this information becomes clearer, it shows that the transition to a semi-permanent power solution on a smaller scale, with improved reliability and cost efficiency, is feasible. This development suggests a significant evolution in the generation segment. Additionally, as mentioned, there is an implication of increased gas demand, and since natural gas is a relatively clean fuel, this aligns with our efforts to support the electrification of various sectors, including data centers and manufacturing, alongside enhanced gas production. Therefore, it's encouraging to see that our government and regulatory frameworks are starting to recognize what is necessary to develop power in an environmentally friendly way to maintain our country’s competitiveness. I think we are moving in the right direction.

The next question is from Bobby Brooks with Northland Capital Markets.

Really impressive results, and it was good to see some of the open capacity contracted with the new energy customer. But what I wanted to hear your thoughts on is this. When I speak to some folks in the industry, everyone clearly understands Solaris' value proposition and its place in the market for power and data centers. But it seems like folks are less enthusiastic when they realize your open megawatts don't come until second half '26. So keeping that in mind, my logic lends me to think that it's probably more likely that a data center contract would more likely be landed in '26 when you're closer to receiving those turbines in the back half of '25. Does that logic make some sense? Or are you seeing something different?

I believe it doesn't make sense. People are discussing the construction of nuclear plants that will be operational in the 2030s and making commitments now. The large-scale frame units scheduled for delivery between 2026 and 2029 are being ordered today. The current planning horizon recognizes the need to align with power requirements. There are still some areas where power can be obtained sooner for smaller demands, and we are starting to utilize some of that unused capacity. However, as larger power demands emerge, there is a planning horizon that extends beyond our current outlook. In many ways, the response to the availability of power by mid-2026 and later has been surprisingly positive rather than negative.

The next question is from Thomas Meric with Janney Montgomery.

I'm curious on kind of longer-term strategy, specifically around partnerships, whether that's partnering with different generation technology developer or fuel source or frame operator, things like that or kind of a service type business like demand response or even kind of a capital partnership for financing. Does anything jump out at you from where we sit today as being very accretive to the Solaris business model? And that's it for me.

I think we view partnerships as bringing complementary skill sets to the table, whether it's the asset base. And so we're in active discussions with gas producers about how to use their gas and put that together with pipeline companies and midstream assets on how do we work together to use what they can control through their assets and what we can control. And discussions with customers where they want to participate in owning a little bit of this and putting a little bit of capital to work in the business across the board. I think that will also play across in some of the electrical contracting installation and operations work where we've got that in a small scale in-house today, and then that continues to grow and be very important to run a high-quality, safe operation for the customer. And we need that kind of engineering and operations talent and technology that is evolving to ensure that these kind of hybrid, if you will, power plants are run as effectively and optimized effectively as possible. So yes, I think partnerships are going to be things that will continue to happen across the board.

The next question is from Blake McLean with Daniel Energy Partners.

Yes. Really, you kind of touched on it there on your last answer. I just wanted a little bit more color on how you guys are thinking about that balance of plant strategy. We know that supply chain is tight. So I was looking for just maybe more color on the collaborations you just talked about on the partnership side and how you're thinking about further development of that capacity in-house and kind of what that does for you as you kind of go to market?

We believe it complements our strategy very well. It's similar to what we're doing in the wellsite business by increasing our activities per customer and gaining more control through top fill units and blenders. As we consider the power business, we see the importance of controlling our own path, particularly with transformers, switchgear, and the software necessary to coordinate everything. We're very focused on determining whether to build these solutions ourselves or to buy them.

And the only thing I'd add to that is I think what it also does is it opens up a wider addressable market with respect to supporting generation that's not necessarily our own, whether it's other modular solutions that are owned Solaris capacity or it's grid interconnect power. So those tangential pieces of kit are relevant for likely a wider addressable market than we even see today despite having a really attractive addressable market today.

This concludes the question-and-answer session. I would like to turn the conference back over to Bill Zartler for any closing remarks.

Thank you. Thank you, everyone, for joining us today. I'm excited about the strong execution from the Solaris team to date and equally encouraged by the opportunities ahead for Solaris as we continue to grow. Our success is a testament to the dedication and hard work of our employees, the trust of our customers, and the strong partnerships with our suppliers. Thank you for being a part of the Solaris team. We look forward to sharing our progress with you in a few months.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.