Solaris (SEI) Q1 2025: Power JV Upsized to 900 MW, Extending Earnings Visibility to 2033

April 29, 2025 | By EarningsIQ Research

Solaris’ Q1 2025 marked a structural leap as its flagship power JV expanded to 900 megawatts under a seven-year contract, locking in multi-year earnings and operational scale. This move, coupled with a tight supply chain and logistics momentum, signals a business model pivoting toward long-term, contracted power solutions for critical infrastructure like data centers. With capacity nearly fully committed and new turbine orders secured into 2026, Solaris is positioning for durable growth and capital discipline amid evolving industrial power demands.

Summary

• Contract Tenor Extension: Power JV upsize to 900 MW with a seven-year contract now anchors Solaris’ earnings profile deep into the next decade.
• Capacity Scarcity Drives Action: Aggressive turbine procurement amid a tightening supply chain ensures Solaris can meet surging demand for data center and industrial loads.
• Logistics Synergies Support Expansion: Legacy logistics cash flow and in-house manufacturing integration underpin Solaris’ ability to reinvest and scale power solutions.

Performance Analysis

Solaris delivered a 31% sequential revenue increase in Q1 2025, driven by both its Power Solutions and Logistics segments. Power Solutions contributed 55% of segment adjusted EBITDA, reflecting its rapid transformation into the company’s earnings engine. The newly upsized 900 MW data center contract, executed via joint venture (JV), extends contracted revenue visibility through at least 2033 and lifts average contract tenor above five years—up from less than one year following the MER acquisition just eight months ago.

Logistics Solutions posted a 25% sequential increase in system activity, with the advanced top fill system effectively sold out and cross-selling driving site-level earnings capacity. Notably, 75% of logistics locations now deploy both legacy sand silos and top fill systems, doubling earnings potential at the well site level. Management confirmed that free cash flow from logistics is being redeployed into Power Solutions growth, creating a self-funding model for expansion.

• Power Solutions Scale Shift: The JV structure, with Solaris retaining 50.1% ownership, enables consolidation of results and non-controlling interest accounting, boosting reported EBITDA while maintaining capital efficiency.
• Fleet Commitment and Growth: With the 900 MW JV contract and additional 330 MW turbine order, Solaris’ operated fleet will reach 1,700 MW by 2027, of which 70% is already contracted.
• Margin Dynamics: Power Solutions is on track to contribute over 80% of consolidated EBITDA post-deployment, with three- to four-year paybacks expected on uncontracted equipment.

Solaris’ Q2 and Q3 guidance points to continued sequential growth in megawatts earning revenue, even as logistics activity may soften if oil prices remain weak in the back half of the year.

Executive Commentary

Strategic Positioning

1. Power Solutions JV: Anchoring Long-Term Growth

The upsize to a 900 MW, seven-year take-or-pay contract with a leading AI data center customer marks a structural shift for Solaris. The JV structure aligns Solaris’ capital with long-term, high-credit tenants and secures a majority of fleet utilization, reducing earnings volatility and providing multi-year runway for capital deployment.

2. Supply Chain Agility: Securing Scarce Turbine Capacity

Solaris moved decisively to secure an incremental 330 MW of 16.5 MW turbines for delivery in late 2026, navigating a supply chain that management describes as “progressively tighter.” This bold procurement ensures Solaris can bid into future large-scale projects and avoids being boxed out of growth by OEM constraints, a critical moat as grid and data center demand surges.

3. Logistics Synergy: Cash Flow and Talent Pipeline

Legacy logistics continues to generate significant free cash flow, with electrified fleets and advanced systems supporting both capital reinvestment and operational cross-training for Power Solutions. In-house manufacturing of emissions control components (SCRs) both lowers cost and mitigates tariff risk, reinforcing Solaris’ ability to manage input costs and product quality.

4. Customer Diversification: Balancing Scale and Concentration

While the expanded JV locks in a marquee customer, management acknowledges the need to diversify the Power Solutions customer base beyond a single hyperscale anchor. Active discussions with oilfield, midstream, and industrial prospects are underway, with open capacity reserved for multi-year contracts in sectors from metals manufacturing to LNG export facilities.

5. Regulatory and Tariff Risk Management

Solaris is proactively addressing regulatory and tariff headwinds by manufacturing key components domestically and structuring contracts to pass through incremental costs. Most turbine orders are US-sourced with fixed pricing, and logistics equipment is domestically built, reducing exposure to trade policy volatility.

Key Considerations

Solaris’ Q1 2025 performance and commercial moves reflect a business in transition from a cyclical logistics service provider to a contracted infrastructure platform for mission-critical power. Investors should weigh the following:

• Contracted Revenue Visibility: The seven-year, 900 MW JV contract anchors Solaris’ earnings profile and supports valuation re-rating toward infrastructure multiples.
• Supply Chain as Competitive Advantage: Early, aggressive turbine procurement is a differentiator as new orders now stretch into 2027-2028 across the sector.
• Customer Concentration Risk: Heavy exposure to a single data center client is partially offset by high credit quality and take-or-pay terms, but diversification remains a critical strategic priority.
• Logistics as Funding Engine: The legacy logistics segment’s cash generation and operational synergies provide both capital and talent to fuel Power Solutions growth.
• Tariff and Regulatory Headwinds: In-house manufacturing and US-based supply chains limit risk, but evolving policy remains a watchpoint for capital costs and deployment timelines.

Risks

Solaris faces execution risk as it scales the Power Solutions segment, especially if supply chain constraints tighten further or if regulatory hurdles delay project commissioning. Customer concentration remains elevated, with over 50% of future EBITDA tied to a single JV partner, and any delay or default would materially impact results. Additionally, softness in oil prices could pressure logistics earnings and slow cash generation for reinvestment.

Forward Outlook

For Q2 2025, Solaris guided to:

• Average megawatts earning revenue up 13% sequentially to 440 MW in Power Solutions
• Adjusted EBITDA between $50 and $55 million

For Q3 2025, management expects:

• Average megawatts earning revenue up 18% sequentially to 520 MW
• Adjusted EBITDA between $55 and $60 million

Full-year guidance was not formally updated, but management reiterated confidence in contracting remaining open capacity and achieving three- to four-year paybacks on new equipment. Key swing factors include data center project timing, oilfield activity, and potential regulatory developments.

Takeaways

• Multi-Year Power Contracts Reshape Solaris’ Earnings Base: The 900 MW, seven-year JV contract transforms Solaris into a long-term infrastructure operator with recurring, contracted cash flow.
• Supply Chain Navigation is Now a Core Competency: Decisive turbine procurement and in-house manufacturing are building a defensible moat as industry-wide capacity tightens.
• Customer Diversification Remains a Strategic Imperative: While the current anchor customer provides stability, future growth and risk management depend on broadening the client portfolio across sectors and geographies.

Conclusion

Solaris’ Q1 2025 results and commercial wins mark a decisive pivot toward contracted, long-duration power solutions for critical infrastructure. The company’s ability to secure scarce capacity, extend contract tenor, and leverage logistics synergies will be central to its long-term value creation and risk profile.

Industry Read-Through

Solaris’ rapid contract tenor extension and supply chain maneuvering highlight the intensifying scramble for reliable, scalable power solutions among data center and industrial operators. The “bring your own power” trend is accelerating as grid constraints and regulatory hurdles mount, with OEM turbine lead times now stretching years out. Players with capital discipline, in-house manufacturing, and legacy cash engines—like Solaris—are positioned to capture premium contracts and infrastructure-like multiples. For the broader sector, the ability to secure equipment and lock in long-term clients will separate winners from those left on the sidelines as digital and industrial power demand continues to surge.

SEI Industrials Power generation Data centers Contracted revenue Logistics Supply chain Tariffs