Solaris Energy Infrastructure (SEI) 2024 Southwest IDEAS Conference summary

Business transformation and growth

• Transitioned from sand handling equipment to mobile power generation, driven by acquisition of Mobile Energy Rentals and a major order for 350 MW of turbines, expanding total capacity to 535 MW by Q3 next year.

• Power generation now represents about half of the business, with a shift from short-term to multi-year contracts, especially for data centers and energy sector clients.

• Rapid deployment of mobile turbines enables meeting large-scale, urgent power needs for AI data centers and industrial customers.

• Supply chain for new equipment is tight, with lead times of at least 12 months for additional capacity; inorganic growth through mergers is considered but limited by available assets.

• Management and legacy shareholders retain over 50% ownership, ensuring strong alignment and focus on shareholder value.

Market dynamics and customer applications

• U.S. grid constraints and surging power demand from AI data centers drive need for rapid, flexible power solutions.

• Mobile turbines are deployed for both data centers and oil/gas production, with contracts now typically two to four years in length.

• Equipment is rented, not sold, to customers, with full service including transformers, switchgear, and cabling.

• Applications extend beyond data centers to oil fields, gas processing, and emergency backup scenarios.

• Turbines can use various gas sources, including field gas, with flexibility for customers to optimize fuel economics.

Financial performance and capital allocation

• Q3 run-rate EBITDA was $125 million, with $50 million from the power segment; guidance for $250 million run-rate EBITDA by end of next year based on firm orders.

• Significant capital outlay in Q4 for turbine orders, tapering as deliveries are received; $325 million term loan in place for financing.

• Dividend initiated in 2018 and increased three times, with ongoing share buybacks and $15 million remaining on authorization.

• Historical returns on capital have been strong, with a three-year payback and IRRs around 20% for new contracts.

• Management expects continued value creation as the business scales and transitions to a power-focused model.