Solaris Energy Infrastructure (SEI) Q2 FY26 earnings call: guidance and Q&A

Solaris achieved a record-setting second quarter, demonstrating significant progress on its growth path. The company is executing its strategy operationally, commercially, and strategically, consistently providing dedicated power to two data centers with high reliability. This performance has led to long-term contracts with three investment-grade technology companies, with two contracts expanded in the last six months and a third expansion with a large energy customer. Management believes current cash flow from contracts significantly exceeds the company's enterprise value.

The acquisition of Global Energy Services Alliance (GESA) in early July is the latest and largest example of Solaris's strategy to build a diversified, integrated power and infrastructure service company. GESA, formed from Baseload Power and Pro-Per Energy Services, extends Solaris's capabilities to full-cycle power services, including generation aftermarket, installation, commissioning, and long-term O&M. This acquisition adds over 600 skilled personnel, derisks execution by addressing labor shortages, and strengthens the ability to earn new business by providing turnkey solutions.

Solaris made an equity investment in Deployable Energy, an early-stage nuclear small modular reactor (SMR) company. Deployable Energy recently achieved criticality under a Department of Energy program, a foundational milestone validating its core design and derisking the technology. Solaris plans to help commercialize this technology, believing it can complement existing power generation capabilities and offer an environmentally friendly solution to future power needs, potentially accelerating timelines with federal support.

The Power Solutions segment averaged approximately 950 megawatts of capacity earning revenue during the quarter, a 4% increase from Q1. Segment revenue grew 23% sequentially to approximately $158 million, and segment adjusted EBITDA increased 34% to approximately $96 million. This growth was primarily driven by increased ancillary service revenue, highlighting the value of Solaris's integrated offerings.

The Solaris Logistics segment continued to perform well, consistently producing over $20 million per quarter in free cash flow, which is being reinvested into the power and infrastructure services business. While segment revenue of $61 million was down 10% sequentially due to lower last-mile transportation activity, segment adjusted EBITDA increased 7% to $25 million, attributed to higher activity and a more favorable project mix. The company notes robust fundamentals for this business, with top-fill equipment effectively sold out.

Solaris successfully transformed its capital structure in Q2, issuing $1.3 billion of senior unsecured notes and securing a new $650 million five-year revolving credit facility. These financings resulted in corporate credit ratings of BB- from S&P, Ba3 from Moody's, and BB from Fitch. The company ended the quarter with over $800 million in cash and a fully undrawn revolver, providing approximately $1.4 billion in liquidity to support current projected growth.

Solaris finalized an amendment to its Hatchbo agreement, converting it into a comprehensive capacity and operating agreement for a 660-megawatt plant, extending the term to 18 years. A second contract expansion with a third investment-grade global technology customer increased scope from 640 megawatts to include incremental balance of plant and natural gas procurement. Additionally, a contract with a large energy customer was expanded from 60 megawatts to 80 megawatts and extended from 4 to 6 years due to grid interconnection delays.

Demand for islanded behind-the-meter power with grid connectivity remains exceptionally strong, with Solaris actively negotiating for multiple gigawatts of additional demand with hyperscalers and AI compute companies. Tailwinds include grid interconnection delays, focus on speed to compute, and regulatory emphasis on consumer prices. The company's flexible solutions allow it to operate effectively despite data center moratoriums in certain jurisdictions, leveraging local development support.