Solaris Energy Infrastructure, Inc. Q3 FY2025 Earnings Call

Good day, and welcome to the Solaris Energy Infrastructure's Third 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 Third Quarter 2025 Earnings Conference Call. Joining us today are our Chairman and Co-CEO, Bill Zartler; and our Co-CEO and Director, Amanda Brock; 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 in the News section on our website. For more details on the company's earnings guidance, please refer to the earnings supplement slide deck published on our website. I'll now turn the call over to our Chairman and Co-CEO, Bill Zartler.

Thank you, Yvonne, and thank you, everyone, for joining us this morning. Solaris had a great third quarter, achieving record levels of quarterly revenue and profit. Our strong results demonstrate that we are executing well and are also showing significant progress on our growth. Solaris is at the center of what appears to be a massive and growing market opportunity. Demand for reliable and efficient power generation is accelerating as data center investment and associated power demand continues to grow at a scale and pace that is providing significant attractive growth opportunities for Solaris. Many data centers now require more than 1 gigawatt of electricity demand per site, which, in some cases, represents only the initial phase of what is likely to evolve into a multi-gigawatt facility. Many of these key artificial intelligence players are now planning numerous locations of this size with multiyear development plans. Power is a key bottleneck for many of these projects. Grid delays, extended equipment lead times, regulatory mandates and surging demand are leading data center developers and hyperscalers to select locations where they can quickly secure significant power for multiple years. Over the course of the last 18 months, Solaris has positioned itself to provide critical infrastructure and services to support this massive investment cycle. In that short time, Solaris has quickly become recognized as a leading power solutions company. This is attributable to our successful track record of delivering a scalable, reliable and flexible power solutions offering. In order to continue our growth trajectory, we must execute well on all aspects of the business. This includes growing a capable team, while maintaining our culture, developing a strong balance sheet and creating power offerings that optimize capacity, timing, capital and flexibility. The optimal power solutions for our customers will likely vary based on the application, scale, location, capital efficiency and importantly, the timing needs of each unique project. Solaris is in a position to provide our customers with the most appropriate solution or solutions for their range of needs at any particular site. We can provide multiple generation sources to our customers as well as gas supply infrastructure, power distribution equipment and resiliency equipment such as battery energy storage systems or BESS. Our solutions can include a combination of natural gas turbines, natural gas reciprocating engines, grid power, BESS, fuel cells and other renewable technologies. It is quickly becoming apparent that an all-of-the-above generation approach could be necessary to meet the rapidly growing power demand. Since we updated you last in July, Solaris has achieved many strategic milestones that have positioned us for substantial growth. First, we continue to demonstrate strong execution. We operated approximately 760 megawatts during the third quarter, up from approximately 150 megawatts only a year ago. Our growing proprietary operational know-how and strong track record of uptime position us as a reliable provider of power. We began successfully providing primary power to a second data center during the third quarter, highlighting our ability to again rapidly deploy power solutions supported by effective collaboration between our employees, our supply chain partners and our customers. Second, we secured additional capacity to position our business to enable us to react swiftly and comprehensively to the numerous meaningful commercial opportunities we are pursuing. With the order of 80 megawatts announced a few weeks ago and an additional order of just over 400 megawatts, we now expect to have pro forma generation capacity of approximately 2,200 megawatts by early 2028, compared to our prior plan for 1,700 megawatts by the first half of 2027. Third, we raised significant capital in the form of new convertible notes to pay off our existing term loan, providing us the financial and operational flexibility to continue our growth. Kyle will share more detail on this shortly. Fourth, our commercial pipeline is deep and growing, as we are currently evaluating a number of potential long-term opportunities. The combination of growing project size, tenor, timing and reliability has resulted in an increasing interest in solutions like ours. Our recognized track record of execution and investments we've made in capacity has positioned us at the forefront for many of these opportunities, and we are confident that the additional capacity we have on order will convert into long-term contracts. Fifth, we have expanded our capabilities and customer base through M&A. In the third quarter, we acquired and welcomed HVMVLV, provider of specialty voltage distribution and regulation equipment and engineering services. HVMVLV stands for high voltage, medium voltage, low voltage, just so you know. Bringing these capabilities in-house further strengthens our power solutions offering by giving us exposure to new high-growth end markets. Importantly, these balance-of-plant solutions are essential across all electricity use cases regardless of generation source. Our acquisition strategy demonstrates how we are strategically both vertically integrating and expanding our technology offering, further enabling us to offer a truly power-agnostic approach to meet our customers' power needs. Finally, we have welcomed additional talent to complement our existing team and drive further commercial and operational success. We've added high-impact team members to our engineering, operations, commercial and support functions. We've also enhanced our executive leadership team with the addition of Amanda Brock as my co-CEO. Amanda has been a trusted partner of mine for the last decade and brings a proven complementary skill set to the office of the CEO. She has an extensive background in building and managing infrastructure, including both water and power, and in leading teams to success. These capabilities come to us at a critical time, as we rapidly scale our operations for the significant growth ahead. As I've been asked many times, I would like to make it clear that I have no current plans to retire. This co-CEO appointment is about covering more ground and accelerating our growth. Moving now to a discussion of our Logistics Solutions segment. I've often referred to our Logistics Solutions business as the engine that could. While less than one-third of our business today, we would not have the success we've had in Power Solutions without the stable cash flow provided by this business segment. This business also is a critical piece of the natural gas value chain required for the Power Solutions segment. We also continue to earn the operational and financial returns on the investments we've made in our logistics systems, which continue to help drive efficiencies for our customers. For example, we've increased our deployment of multiple Solaris systems on customer locations, which enables more efficient throughput of raw materials and, in turn, helps our customers accelerate their development schedules. Year-to-date, we've deployed multiple Solaris systems on 90% of our customers' locations, which compares to approximately 60% a year ago and 40% the year before that. We believe that our technology portfolio positions Solaris as the partner of choice for operators and service companies pursuing the industry's leading-edge completion designs. During the third quarter, Lower-48 oil and gas industry activity contracted to what we believe reflects a near-term trough as evidenced by early fourth quarter activity levels. We believe this segment will continue to generate significant free cash flow while providing a highly reliable and efficient system for our customers. In summary, we are pleased with both the operational and commercial advancements achieved during the quarter. We are confident that the growing demand for our power services will continue, and we are demonstrating that confidence through our incremental generation orders as well as our continued inorganic investment. We're also taking deliberate steps to ensure that we have the right balance sheet and the right people in place to position Solaris for continued growth. As has been emphasized by our country's leaders, winning the AI race is an imperative strategic objective for the U.S. Solaris can play an important role in advancing this objective by using its technology to efficiently generate and deliver large-scale, reliable, clean energy. With that, I'll turn it over to Kyle.

Thanks, Bill, and good morning, everyone. Solaris' third quarter demonstrated another quarter of significant growth and solid execution in our Power Solutions segment as well as continued execution and strong free cash flow generation in our Logistics Solutions segment. This growth and execution were driven by the dedication and skills of our team, the continued support of our customers and the dependability and flexibility of our suppliers. During the third quarter, Power Solutions contributed more than 60% of our revenue and over three-quarters of our segment-level adjusted EBITDA. These results are attributable not only to a robust industry backdrop, but also to the value of the Solaris offering and the team's execution. As Bill highlighted, in addition to the previously announced 80 megawatts we recently ordered, we have also secured additional generation capacity for a total of approximately 500 megawatts. This brings our pro forma expected generation capacity to approximately 2.2 gigawatts by early 2028, which compares to our prior order book of approximately 1.7 gigawatts. As previously announced, concurrent with our recent convertible financing, we expect the first 80 megawatts of our new orders to be delivered by year-end. The remaining delivery schedule is concentrated around the second half of 2026 and the second half of 2027, with final deliveries of this most recent order occurring in early 2028. Capital expenditures associated with the 500 megawatts total approximately $450 million, consisting mostly of turbines and associated emissions control equipment. Once equipment is contracted at a particular site, we expect to add additional project scope to accommodate the unique specifications of any given location and customer need. This increased content would be expected to generate returns on invested capital comparable to the economics of our current Power Solutions offering. As a result of our recent financing and the ongoing cash flow generation ahead of these deliveries, we have sufficient cash to fund these incremental generation orders. In early October, Solaris raised approximately $748 million in the form of senior convertible notes due 2031 with a 0.25% coupon. The proceeds from this offering were used to repay our existing term loan and will be used to fund the 500-megawatt order. This financing also unlocks significant flexibility for Solaris, given the removal of restrictive covenants as well as the meaningful incremental near-term cash flow it unlocks. Over the next four quarters, we now expect to save approximately $45 million in the form of interest and amortization savings as compared to our prior capital structure. Turning now to a review of our third quarter results and our outlook for the next two quarters. During the third quarter, Solaris generated revenue of $167 million and adjusted EBITDA of $68 million on a consolidated basis. Our adjusted EBITDA grew 12% from the prior quarter and increased more than three times as compared to the same quarter last year, driven by the acceleration of our Power Solutions segment. The primary driver of growth versus the prior quarter was continued activity growth in Power Solutions, which more than offset a modest decline in Logistics Solutions activity. We generated revenue from approximately 760 megawatts of capacity during the third quarter, which reflects an increase of more than 27% from the prior quarter. This increase in activity was driven by increased and accelerated demand from our customers, which we are meeting using a combination of new turbine deliveries as well as selective short-term sourcing of third-party generation capacity. Segment adjusted EBITDA for the Power Solutions segment was $58 million, a 27% increase from the second quarter. We expect segment adjusted EBITDA next quarter to be relatively flat as a full quarter's benefit from the ramp in operated megawatts and the HVMVLV acquisition is offset by a mix impact from lower spot utilization and commissioning work. While we expect the recent order of 80 megawatts to have a limited impact on fourth quarter results given the expected timing of deliveries, we expect this incremental capacity to drive first quarter 2026 segment adjusted EBITDA for Power Solutions higher sequentially relative to the fourth quarter of this year. In our Logistics Solutions segment, we averaged 84 fully utilized systems, a decline of 11% from the second quarter. We believe the third quarter represents a near-term bottom in drilling and completion activity and expect our segment adjusted EBITDA to improve slightly in the fourth quarter. Netting these factors and considering corporate and other expenses, total adjusted EBITDA guidance for the fourth quarter is now $65 million to $70 million, up from the prior guidance of $58 million to $63 million and relatively flat from the third quarter. We are also introducing our first quarter 2026 total adjusted EBITDA guidance of $70 million to $75 million. Accounting for expected longer-term tenor on our fully delivered 2,200 megawatt generation capacity and our recent acquisition, our new estimate of pro forma earnings of the company could be over $600 million before considering any additional scope or growth with our existing customers or new opportunities. We are excited about the accelerating growth of the industry and about the significant strategic steps we've taken to maximize our opportunity to continue to grow. Our priority remains to deliver strong returns on invested capital as we continue to develop our Power Solutions business while sustaining leading market share and strong cash flow generation from our Logistics Solutions operations. With that, we'd be happy to take your questions.

The first question is from Dave Anderson of Barclays.

I was wondering if you could talk a little bit about how you see the supply chain today. You're placing orders now for 2028 deliveries. Is this going to get stretched out a bit more than, say, a year ago? And I would imagine the competition for OEM slots has become substantially tighter in the last few months. I was wondering if you could talk about some of those challenges that you're facing as you look to build out the power business.

I think you surmised it well, David. The supply chain is growing out. We are lucky to get the slots we have with our relationships, and we're exploring other avenues for getting power. Hence, I think what we referred to as multiple sources of generation to power these things, especially in timing-wise. And we're spending a lot of time on the distribution side and the equipment side. We had a team over in Asia last week looking at a couple of OEM flexibility options around how we get ahead of transformers and switchgear and breakers and those kinds of things on a portable basis as well as for permanent equipment. So I think that's a very important part. As I said, we need to execute on all phases of the business and supply chain is clearly one of those phases that's really driving a lot of things today.

Customers are increasingly recognizing the opportunity to develop behind-the-meter solutions that offer reliable generation aligned with their strategic priorities. This awareness is influencing our plans for fleet expansion. The potential for growth appears to be increasing, which necessitates a rise in our available capacity. Therefore, we are highlighting that the scale of these opportunities is expanding. We have added capacity for the second half of 2027, and while delivery dates for future orders may be extended, we have a strong track record of successfully securing capacity. Our team possesses extensive experience in generation across the globe, which sets us apart from newer entrants in the market. We have decades of expertise in both generation and distribution, and this enables us to leverage our strengths effectively.

I believe there is a significant difference in how you are managing the megawatts currently. You've mentioned the balance of plant, and the challenge of managing this power extends beyond simply owning it. You made that acquisition this summer related to the balance of plant. I also observed that this quarter, revenue per megawatt increased by about 10%. Are we beginning to see the effects on the balance of plant, or is this mainly due to improved efficiency and equipment utilization? How should we approach modeling this in the future? Is this a figure we should expect to increase steadily over time?

There are many factors to consider. In the third quarter, we managed to deploy a significant amount of additional generation beyond our initial guidance, which has positively impacted our results. We are seeing some contributions from our commissioning efforts during this period. The fundamental returns on our equipment remain consistent with our previous indications. Other factors relate to duration, and as we evaluate the mix of customers and duration, there may be various perspectives on the returns.

The next question is from Derrick Whitfield, Texas Capital.

Congrats on your update. And Amanda, congrats on your appointment. For my first question, I wanted to focus more on the competitive landscape. With this announcement, it's clear that you feel confident in your ability to place your power generation capacity. With that said, to what degree did the recent announcements from Halliburton and Liberty change your view on the size of the growth opportunity for Solaris?

We are engaged in our own discussions, and the actions of others do not necessarily influence us. I believe this market is very large, and it will require multiple companies to meet the increasing power demand. Therefore, our outlook remains unchanged in any way.

Yes. And I'd say just to put it in context, so the 2,200 megawatts we're talking about here, to satisfy the leading-edge sort of incremental data center. I'm not sure that satisfies even two at this stage. So the sizes of these infrastructure projects continue to grow, to Bill's point, such that it's just a large market.

Yes, fair point. And maybe just to build on that, based on the flurry of recent power AI development announcements across West Texas and the amount of BTC miners that are converting to data centers, do you guys see an opportunity to co-bid these developments with those operators to meet reliability needs of the end client?

I believe one key aspect of flexible generation is our growing expertise in managing distribution equipment and integrating various power sources. The execution of these solutions will involve a blend of multiple inputs, such as surplus grid power utilized by Bitcoin miners and their on-site backup generation. Additionally, we may incorporate new permanent or bridging power solutions on-site. Ultimately, the design of these systems will depend on the scale of operations and the industry's timing requirements.

And our fleet, if you think about just max flexibility with respect to in general, the mobility of the actual equipment, also the size. These are medium-sized gas turbines that are able to be moved and rigged up quite quickly relative to some of the other larger equipment that may be more permanent in nature. And so to your point, as the opportunities shift around in terms of geography, we really benefit from that. And that also ties into our legacy business. One of the real keys to success of the 10-plus years track record of the legacy Solaris business has been the fact that we've had equipment that can go anywhere at a moment's notice. And so that's allowed us to be very nimble. And I think that will continue to be a paramount sort of culture tenet to our business.

I would like to acknowledge the engineering team involved with the legacy business and our capacity to review the power generation sector and adapt equipment for increased mobility. The oilfield pioneered the development and collaboration for mobile turbines, and we have further enhanced this with mobility in catalytic reforming technology. We have created our own mobile SCRs through in-house engineering that connect swiftly and efficiently, reducing downtime for the emission control system. This combination of engineering expertise and emphasis on mobility and prompt execution has been crucial to the ongoing success in both sectors.

The next question is from Don Crist of Johnson Rice.

Given that I'm one of the only analysts that covered both Aris and Solaris, I have kind of unique impact or relation to Amanda. Just a quick question on the co-CEO role. Is it expected to be kind of the divide and conquer? Or are you all going to make kind of decisions together? And kind of second part of that question, Amanda, I know you've only been there a week or so, but your initial impressions on kind of how the team has put together and your initial impressions as you kind of get to work?

I'll let you start there.

Certainly, and thanks, Don. So look, I'm very happy to be here with this team. I've known Kyle since, I think, 2017, and it's great to still be side-by-side with Bill. And anybody who knows Bill and me knows that we are different, but have very complementary skill sets. So some of it is, and Bill will talk about it, divide and conquer so we can cover more ground and of course, not getting in each other's way and make decisions that are going to enhance the effectiveness and to use Kyle's word nimbleness of the company. In terms of observations, actually, this is the beginning of week 3 because there was no downtime, and it is really drinking from the proverbial fire hose. The speed at which this market is moving is unprecedented. And there are huge tailwinds and opportunities for us, as we focus on delivering these power solutions into a market where power is emerging as a critical bottleneck. The deals we are engaging on and the deals that I've gone straight into work on are real and tangible with very credible counterparties. We have a distinct advantage to have already demonstrated our ability to deliver. I mean we've been out there. We've been operating, and that just gives you a real perspective. And as Bill has repeatedly emphasized, we've got this track record of executing on large scale and getting larger data center projects and have developed know-how, software, proprietary processes that we can apply on new projects, and that is an advantage. So high-quality opportunities for continued growth. I'm very optimistic. I'm happy to be here, and there's one incredible road ahead of us. So Bill?

As a divide and conquer, you just covered it all. So no need to double up.

I appreciate that color. And a big question coming into this earnings cycle is going to be whether or not you announced a new contract or not. But I think you have said in past calls and whatnot that you wouldn't order any additional equipment if you weren't close on another contract signing for a data center or a large project. Is that still the case? And I know you don't want to give specific timing, but should we assume something in the next 90 to 180 days that could kind of soak up all that equipment you have on order today?

That is still the case, and your assumptions are pretty good.

The next question is from Derek Podhaizer at Piper Sandler.

Maybe just a bigger picture question. I want to discuss the type of advantage HVMVLV gives you when you're bidding on these large data center projects, and we're talking a gigawatt plus here. So obviously, there's a lot of companies out there going for this behind-the-meter power market. It creates a lot of confusion for investors, who's best positioned and what's a differentiating factor. Maybe you could just help us understand your differentiating factor versus your peers, I mean, including this integrated solution, which has been bolstered by HVMVLV. Just help us and investors how we should really think about that.

When considering operations and skill sets, it's important to note that the output from the generator isn't what directly powers the data center or other utilities. Power must be regulated and converted to the appropriate voltage level to meet the building's needs. This involves managing various components with switchgears and ensuring safety with breakers and switchgears. Furthermore, it's essential to recognize that other elements significantly influence the generation source. As we've noted, there will be multiple generation sources to meet this increasing demand, which is evolving rapidly. This makes it crucial to pair the right electrical distribution equipment downstream. Our edge lies in our capability to engineer, design, and operate these systems, giving us a distinct advantage, particularly concerning turbines. The modeling of these businesses has its complexities; it's more than just multiplying megawatts by dollar value to determine worth. It's vital to protect the business by establishing a strong operational process, technology, and the essential electrical equipment that ties it all together. Just like a house needs mortar to hold the bricks in place, this industry requires foundational elements that integrate effectively.

Got it. That's helpful. And then maybe back to your comments about your all-of-the-above power approach. Historically, you've been heavy on the turbines, obviously, the 5.7, 16.5, 38. But it sounds like you'll be exploring battery systems, potentially recips. Just could you help us understand kind of that all-of-the-above approach and then maybe just your latest, the additional 400 megawatts, was that all turbines? Was that a mix of a different type of kit? Just maybe a little bit more color around that.

Yes, I believe the turbine will continue to be the mainstay of the power generation industry, similar to the role of gas turbines in our national power system. While it remains our primary focus, we are also exploring ways to enhance flexibility and timing, as turbines exhibit unique performance characteristics based on heat and altitude. We are integrating them with engines that have less sensitivity to heat variations, like large reciprocating generators, which we are currently using as part of our setup. This isn't an entirely new approach, but rather a small aspect of our overall strategy. We anticipate a slight growth in this area of generation. Batteries play a crucial role as well, especially when considering the reliability requirements for data centers. These facilities require near 100% reliability to maintain cooling systems, which is essential for preventing equipment failures. The investment involved is significant. Therefore, it's important to view batteries as a means to safeguard against fluctuating loads from data center demands, while also offering short-term solutions aligned with the resilient design of our power grid. Every data center operates differently, which means there isn't a one-size-fits-all model. Data centers are often constructed with multiple data halls that can function independently or together, allowing them to support cooling systems separately from their chip systems. This variability highlights the necessity of our distribution approach, which ensures that we can effectively align the specific power needs of a data center with the generation equipment we deploy.

The next question is from Scott Gruber, Citigroup.

You know some growth CapEx in your '27 outlook. Curious about the Stateline JV, once the 900 megawatts is deployed. Is the JV expected to send cash back up to Solaris? Or do you pay down the term loan? Or does that cash get recycled back into expanding the JV? Just some thoughts on how to think about the JV and the JV cash flow once the 900 megawatts is deployed.

Yes, good question, Scott. There is debt at the joint venture, which requires servicing in terms of interest and amortization. However, there is considerable flexibility within the terms of that debt instrument that enables us to send cash to both ourselves and our partner in the JV. The Board of the JV, comprising representatives from both Solaris and our customer, can decide whether to distribute the cash. Alternatively, we can choose to retain the cash and continue investing at that level to meet the increasing power needs of the customer. There is a lot of flexibility in this structure, and we managed to finance it at an attractive rate in relation to the advance rate on the equipment. We believe this structure will offer significant flexibility and the potential to drive returns for us.

Can you share your thoughts on megawatts deployed over the upcoming quarters and the shift from third-party re-rents to wholly owned capacity based on the delivery schedule and increasing customer demand? When do you expect to achieve fully owned capacity in the field?

Good question. Obviously, that's continued to change and extend as we've added capacity into the order book. As we look at next year, there's really two legs of growth as far as operated capacity. The first is the JV getting stood up with respect to its permanent generation. And we are supporting the power needs of our customers that will ultimately be funded with the JV vis-à-vis some of the re-rented assets today as well as some of our own assets. So next year, we'll see the construction of roughly 900 megawatts of permanent power for the JV. And then we'll also see delivery of about 400 megawatts that was placed back in March of this year. So those are the two avenues of growth for '26. And then as we look into '27, it's primarily the order that we just placed. One small additional note, we did pick up some capacity in the fourth quarter of this year, which will have a full impact beginning in the first quarter of next year. So as we look at the full stood-up fleet, it's sort of a second half of '28, is sort of how I would look at it.

Next question is from Jeff LeBlanc, TPH.

Bill, in the prepared remarks, you mentioned locations evolving to multiple gigawatt sites over the next several years. Given this opportunity set, could you help frame the size of your customer pipeline? And is it safe to assume that by the end of the decade, your operating fleet will be larger than 2.2 gigawatts?

I believe the pipeline is significant and there's an overwhelming amount of activity. I've never witnessed anything like it before. It's likely that within a couple of years, we will exceed our current orders.

The next question is from Michael Dudas of Vertical Research.

Two questions. One, Bill, could you maybe share some of the circumstances surrounding the second data center order that you cited in the press release? And secondly, as you are negotiating regarding contract tenor, any further confidence thoughts on length? Is that still a sticking point given where people are expecting grid connections out to the future or other BTM solutions? Just want to get a sense if that's still part of the negotiations.

I believe the second data center that we established in the second quarter was anticipated and is now part of our joint venture, Stateline Power LLC. We currently have it operating on temporary power with full emissions control in place. We are also beginning construction on the gigawatt-plus power plant next quarter and into next year as we increase the delivery of equipment to the permanent site for that facility. The data center was set up quickly during the quarter, and it is stable. We will start integrating it into the permanent site around the beginning of January. What was the second question?

Contract tenor...

Contract tenor is clearly shifting towards longer terms. The delays in grid announcements, the increasing demand for power, and the government's SB6 approach indicate that there is a realization that this power will be needed for an extended period. This is significantly changing average contract tenors compared to what was considered necessary about a year ago. It's evolving into more of a permanent power solution or a backup system if grid solutions become available at a lower cost. Additionally, there is increased sensitivity within the regulatory framework and among the public regarding rising power prices, and the understanding that behind-the-meter solutions can help mitigate some of that is an important factor our customers are considering.

I appreciate it. Just a quick follow-up. When you discuss behind-the-meter and the all-the-above approach mentioned throughout this call, could you rank other solutions in relation to what Solaris offers on your core gas turbine side and how that might affect your lead time or ability to secure these projects compared to other market solutions?

Other solutions focus on identifying specific grid locations with excess power and utilizing that energy. Currently, due to the size of data centers, there is a need for either backup power or complementary primary power. As these locations with excess power become occupied, they are becoming increasingly scarce, which is where our power solutions come into play. I believe the Williams team is a reputable organization that manages numerous assets nationwide, employing a strategy similar to ours in terms of equipment and long-term contracts. The market is starting to recognize that natural gas will be the incremental power source needed, whether as backup power behind-the-meter or through large utility turbines on the grid. Ultimately, stable power for data centers will rely on natural gas as the primary fuel source.

I want to add that when we refer to additional sources of generation to support our turbine operations, it allows us to enhance our current turbine capacity. Essentially, if we can supplement with larger gas reciprocating engines or possibly fuel cells, it enables us to increase the turbine capacity on our balance sheet for a wider range of megawatts to meet total demand from a data center viewpoint. We have secured the most critical component with the gas turbines, which has the longest lead time. If we can couple that with extra generation sources, whether through a combined cycle plant that is either grid-connected or operating in an isolated mode, or through reciprocating engines or fuel cells, it provides us the flexibility to continue expanding the 2,200 megawatts without necessarily needing to add more turbines within the timeframe where we can bring on other power generation sources.

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

Congratulations Amanda on your new role as co-CEO. I wanted to follow up with Kyle regarding how adding new power generation can enhance the core turbine power on your balance sheet. In your future contract negotiations, is there a provision that states, for example, we will provide you with 400 megawatts of power, without specifying the type of asset generating that power? I'm just interested to know about that.

I think it's a mix of various factors. The key asset we have to engage with customers is our current order book. However, as we discuss with customers, their needs exceed what we currently have. In our contract discussions, the first step is to secure our existing balance sheet, and the second step is recognizing that their demands are larger. We're offering them options and flexibility to increase total capacity. This may also involve other gas turbines that we haven't yet secured. Overall, we have a solid starting point for meeting customer needs, and any additional capacity can be addressed through more gas turbines, reciprocating engines, or other types of generation, giving us plenty of options.

Thank you. Thank you, everyone, for joining us today. I'm excited about the continued growth we've achieved to date as well as the growth that's to come. We're excited to see the Solaris family continue to grow both organically and through acquisitions. 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 part of the Solaris team. We believe we are just getting started and continuing to meet the industry's growing and urgent needs for comprehensive power solutions. We look forward to sharing our progress with you in a few months. Thank you.

Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.