Solaris Energy Infrastructure’s Zartler on building power capacity

TODAY. >> SOLARIS ENERGY INFRASTRUCTURE HAS BECOME A MAJOR BENEFICIARY OF THE RACE TO POWER THE AI ECONOMY. AND INVESTORS HAVE BENEFITED AS WELL. THE STOCK IS UP MORE THAN 400% OVER THE PAST TWO YEARS. THEY RECENTLY RAISED THEIR OUTLOOK AGAIN, STRONGER DEMAND FOR POWER SERVICES, DRIVING THE GUIDANCE. AND JOINING US NOW IN AN EXCLUSIVE INTERVIEW IS BILL ZARTLER. HE IS THE CHAIR AND CEO OF SOLARIS ENERGY INFRASTRUCTURE. AND YOU REMINDED ME THAT WE MET SIX OR 7 OR 8 YEARS AGO, THE LAST COUPLE OF YEARS. YEAH. PRE COVID AT A OIL FIELD EVENT IN MIDLAND, TEXAS, BECAUSE THEN YOU WERE CALLED SOLARIS OIL FIELD SERVICES, CORRECT? THAT'S CORRECT. SO WHY WHY THE PIVOT? WHY GO FROM WHAT YOU DID TO WHAT YOU'RE DOING NOW? >> WELL, IN OUR OIL FIELD LEGACY BUSINESS, WE HAD A TREMENDOUS MARKET SHARE IN A IN A, IN AN AREA OF THE INDUSTRY THAT WASN'T REALLY GOING TO GROW THAT RAPIDLY. SO WE HELPED FACILITATE A WHOLE LOT OF THE EVOLUTION OF HOW THINGS WERE HANDLED AT THE WELL SITE, A LOT OF MOBILITY WE GENERATED ON POWER AT THE SAME TIME SAW THE OPPORTUNITY TO ADD TO THE POWER BUSINESS AND MORPH IT INTO WHAT WAS NEEDED IN THE AT THAT POINT, WAS OIL FIELD POWER NEEDED BY THE ENERGY INDUSTRY AND MIDSTREAM FOLKS THAT NEEDED IT, AND OTHERS THAT WERE OUT OF ELECTRICITY. THAT MORPHED VERY QUICKLY INTO OUR FIRST CUSTOMER IN MEMPHIS, HELPING THEM BUILD THE BUILD THE FIRST REAL AI DATA CENTER. >> AND HOW FAST. IF I WANTED TO BUILD A DATA CENTER AND I COME TO YOU AND I SAY, BILL, POWER ME UP, RIGHT? BECAUSE YOU WANT TO DO SORT OF SELF-CONTAINED POWER AND INFRASTRUCTURE, HOW FAST CAN YOU GET THAT DONE? >> EVERYTHING WE'RE DOING IS ALL SELF-CONTAINED. AND TODAY WE'RE LOOKING AT EQUIPMENT. AVAILABILITY FOR NEW EQUIPMENT IS PROBABLY 2030. WE'RE IN THE PROCESS OF BUILDING OUT SIGNIFICANT AMOUNT OF INFRASTRUCTURE RIGHT NOW. SO TODAY WE OPERATE ABOUT 4000MW OF POWER, ABOUT A ABOUT 1000MW. THAT IS POWER THAT WE OWN. SO WE OPERATE FOR THIRD PARTIES AS WELL. WE'RE ROLLING OUT ANOTHER 2500MW OVER THE COURSE OF THE NEXT TWO YEARS. >> IS THAT YOUR OWN POWER? >> THAT'S OUR OWN POWER. >> WHERE ARE YOU GETTING THAT POWER? >> WE'RE GETTING THAT POWER FROM THE CATERPILLAR SOLAR TURBINES FROM BAKER, HUGHES AND SIEMENS. SO. >> BUT IS IT NATURAL GAS THEN? >> NATURAL GAS? >> BAKER AND CATERPILLAR. I ASSUME IT'S GAS. >> CLEAN NATURAL GAS. YES. >> OKAY. AND THERE'S ENOUGH GAS THAT YOU CAN ADD. WHAT, TWO GIGS JUST LIKE THAT. >> THERE IS ENOUGH GAS. THE INFRASTRUCTURE IS IN PLACES. I THINK THAT'S A SELECTION PROCESS THAT THE DATA CENTER HAS TO EVALUATE FAIRLY FIRMLY ABOUT WHERE THEY'RE GOING TO PUT IT, AND WHAT KIND OF INFRASTRUCTURE NEEDS TO BE IN PLACE TO BE ABLE TO SUPPLY THAT KIND OF QUANTITY. >> SO YOU EXIST. THE GAS EXISTS. HOW HARD IS IT TO GET THE GAS TO YOU BUILDING A PIPELINE OR WHATEVER. >> IT MIGHT BE? PIPELINE. YEAH. >> AND WHAT'S THE BACKLOG? BUT THERE'S A BACKLOG AMONGST THAT THOUGH, TOO. IS THERE NOT. >> A PIPELINE? IT'S MORE ABOUT THE SAME IN THE RIGHT OF WAY DEPENDING ON WHERE YOU ARE. I MEAN, AS THE AS THE BIG DATA CENTERS MIGRATE TO AREAS WHERE IT'S EASIER TO GET THE RIGHT OF WAY AND NON-MUNICIPAL AREAS, IT'S EASIER TO GET THE RIGHT OF WAY TO LAY A PIPELINE. AND THE BOTTLENECK FOR THAT IS MONTHS, NOT. >> I'M BUILDING A DATA CENTER. I COME TO YOU. YOU WANT TO OFFER THE POWER SOLUTIONS? GET ME UP AND RUNNING. I GOT TO SIGN A CONTRACT. HOW LONG IS A. I KNOW EVERYTHING'S DIFFERENT, BUT HOW LONG, BILL, ARE THE SORT OF THE NORMAL CONTRACT WITH THE CUSTOMER? >> WE'RE TEN TO 10 TO 15 YEARS. >> SO THE CASH FLOW IS LONG. >> LONG. THIS IS AN INFRASTRUCTURE BUSINESS, LONG TERM, LONG TERM HIGH CAPITAL INTENSITY UPFRONT, BUT A LONG TERM TAIL OF EARNINGS COMING OUT OF IT. >> YEAH. BECAUSE I'VE GOT TO ASSUME IF YOU'RE GOING TO TAKE ON THAT KIND OF A BUILD, A BUILD OUT, BUILDING POWER TO A DATA CENTER, DOES IT HAVE TO BE A MINIMUM OF A TEN YEAR DEAL IN ORDER FOR IT TO MAKE SENSE FOR, SAY, FOR YOUR COMPANY? >> WE'RE FOCUSED ON LONG TERM DEALS. WE HAVE A MIXTURE IN THE PORTFOLIO OF ANYWHERE FROM FOUR YEARS TO 15 YEARS. AND I THINK WE EVALUATE THE PRICE ALONG WITH THE TIMING OF THAT. SO THERE'S A TRADE OFF. >> A BIG PART OF THE BUILD OUT IS DEBT FUELED, AS YOU KNOW, HUNDREDS OF BILLIONS OF DOLLARS IN DEBT THAT IS GOING ALL AROUND TO, TO PAY FOR THE FOR THE BUILD OUT. WE TALK EVERY DAY ON THIS NETWORK ABOUT HIGHER RATES, OUR HIGHER RATES IMPACTING THE BUILD OUT. AS YOU SEE IT RIGHT. >> NOW, AT THIS POINT, THE RATES DON'T SEEM TO BE IMPACTING ANY OF OUR CUSTOMERS. THE CUSTOMERS ARE OUT RAISING MONEY TODAY AND THEY'RE EVALUATING THIS. THE THE MARGIN AND THE FUNDAMENTALS. FROM WHAT I SEE IN OUR BUSINESS AND OTHERS, YOU KNOW, YOU CAN TALK ABOUT WHAT'S HAPPENING IN THE INDUSTRY, BUT THE THE MARKET FEELS LIKE IT'S VERY, VERY EARLY IN TERMS OF THE ADOPTION. I CAN SEE IT IN OUR BUSINESS. I CAN SEE THE USE OF AI AND THE USE OF THE COMPUTER TOOLS, BOTH GROWING IN OUR OPERATIONS FROM A MECHANICS AN