Solaris Energy Infrastructure, Inc.

Current report

Tariffs and other trade measures could adversely affect our results of operations, financial position and cash flows.

Current report

In April 2025, the U.S. government announced a baseline tariff of 10% on products from all countries and an additional individualized reciprocal tariff on the countries with which the United States has the largest trade deficits. As a result of the new administration's trade policy, tariffs have increased and may continue to increase our material input costs. Any further trade restrictions, retaliatory trade measures and additional tariffs could result in higher input costs to our products, increased costs and delays in meeting our customers’ orders. For example, several of our rental orders for power generation equipment provide for adjustments to the purchase price paid in response to future taxes or tariffs not in place at the time of agreement. We may not be able to fully mitigate the impact of these increased costs or pass price increases on to our customers.

Current report

The imposition of further tariffs by the United States on a broader range of imports, or further retaliatory trade measures taken in response to additional tariffs, could increase costs in our supply chain or reduce demand of our customers’ products, either of which could adversely affect our results of operations. Additionally, changes in trade policy may have negative impacts on the global economic environment (including causing or exacerbating any potential recession) which could have a negative impact on the demand for our power generation solutions as our customers delay or cancel projects in which our business may service.

Current report

The ultimate impact of these trade measures on our business operations and financial results is uncertain and may be affected by various factors, including whether and when such trade measures are implemented, the timing when such measures may become effective, the amount, scope, or nature of such trade measures, the direct or indirect impacts that trade measures may have on consumer business sentiment and the broader economy and our ability to execute strategies to mitigate the negative impacts.

Current report

We are subject to a number of risks associated with the Stateline joint venture.

Current report

On April 28, 2025, we announced the formation of Stateline Power, LLC (“Stateline”), a joint venture between our newly formed, wholly owned subsidiary Solaris Power Solutions Stateline, LLC and CTC Property LLC (“CTC”), an affiliate of an industry leader in the evolving artificial intelligence computer space. The Stateline joint venture is expected to account for approximately 900 MW (or approximately 53% of our Solaris Power Solutions’ generation assets), and as such, the Stateline joint venture subjects our overall business to a number of risks, including:

Current report

To the extent one or more of these risks materializes, our Solaris Power Solutions segment and, in turn, our consolidated business and results of operations could be adversely affected.

Current report

We may be subject to short selling strategies and are party to various proceedings and claims related thereto from time to time.

Current report

Short selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. We are, and may in the future may be, the subject of unfavorable allegations made by short sellers. For example, earlier this year, Morpheus Research issued a report to short sellers that contained certain allegations against us that we believe to be misleading (as discussed further below). Any such allegations may be followed by periods of instability in the market price of our shares of common stock and negative publicity.

Current report

Any related inquiry or formal investigation from a governmental organization or other regulatory body, or resulting litigation from private claimants, could result in a material diversion of our management’s time and could have a material adverse effect on our business and results of operations. Such a situation could be costly and time-consuming and could distract our management from operating our business. For example, on March 28, 2025, a purported Solaris stockholder filed a complaint in a putative class action lawsuit styled*Stephen Pirello v. Solaris Energy Infrastructure, Inc., et al.,*Case No. 4:25-cv-01455, in the United States District Court for the Southern District of Texas. The complaint asserts claims against Solaris and certain of its officers under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, alleging among other things that they made misleading statements and omissions relating to Solaris’s acquisition of Mobile Energy Rentals LLC. The complaint further alleges that these allegedly misleading statements and omissions were revealed in the Morpheus Research report regarding Solaris issued on March 17, 2025, which the complaint alleges caused a decline in Solaris’s stock price. The outcome of the lawsuit is uncertain, particularly because it is at its initial stages. However, the Company believes the lawsuit is without merit and intends to vigorously defend against it.

Current report

We may be unable to raise the funds necessary to repurchase the Convertible Senior Notes for cash following a fundamental change or to pay any cash amounts due upon maturity or conversion of the Convertible Senior Notes, and our other indebtedness limits our ability to repurchase the Convertible Senior Notes or to pay any cash amounts due upon their maturity or conversion.

Current report

Noteholders may, subject to a limited exception, require us to repurchase their Convertible Senior Notes following a fundamental change at a cash repurchase price generally equal to the principal amount of the Convertible Senior Notes to be repurchased, plus accrued and unpaid interest, if any. Upon maturity of the Convertible Senior Notes, we must pay

Current report

their principal amount and accrued and unpaid interest in cash, unless they have been previously repurchased, redeemed or converted. In addition, upon conversion, we will satisfy part or all of our conversion obligation in cash unless we elect to settle conversions solely in shares of our Class A common stock. We may not have enough available cash or be able to obtain financing at the time we are required to repurchase the Convertible Senior Notes or pay any cash amounts due upon their maturity or conversion. In addition, applicable law, regulatory authorities and the agreements governing our other indebtedness may restrict our ability to repurchase the Convertible Senior Notes or pay any cash amounts due upon their maturity or conversion. For example, we expect to fund payments due on the Convertible Senior Notes from corresponding payments due to us under the subordinated intercompany convertible note to be issued by Solaris LLC to us. Each of our Term Loan Agreement and revolving credit facility will prohibit Solaris LLC from making payments to us under the subordinated intercompany convertible note except to provide for regularly scheduled interest payments, provided no events of default exists under the Term Loan Agreement or revolving credit facility, as applicable, or would result therefrom, and except for certain other payments in equity interests. Accordingly, we may not have access to funds from Solaris LLC to repurchase the Convertible Senior Notes for cash following a fundamental change or to pay any cash amounts due upon conversion of the Convertible Senior Notes. We may seek to obtain a waiver under the Term Loan Agreement and revolving credit facility to permit these payments, but we cannot assure you that we will be able to obtain such a waiver. Unless we exercise our option to settle conversions solely in shares, our failure to repurchase the Convertible Senior Notes or to pay the cash amounts due upon their maturity or conversion when required will constitute a default under the indenture governing the Convertible Senior Notes. A default under such indenture or the fundamental change itself could also lead to a default under agreements governing our other indebtedness, which may result in that other indebtedness becoming immediately payable in full. We may not have sufficient funds to satisfy all amounts due under the other indebtedness and the Convertible Senior Notes.

Current report

The issuance of shares of our Class A common stock upon conversion of the Convertible Senior Notes will dilute the ownership interests of our stockholders and could depress the trading price of our Class A common stock.

Current report

Upon conversion of the Convertible Senior Notes offered in the Notes Offering, we will satisfy part or all of our conversion obligations in shares of our Class A common stock, unless we elect to settle conversions solely in cash. The issuance of shares of our Class A common stock upon conversion of the Convertible Senior Notes will dilute the ownership interests of our stockholders, which could depress the trading price of our Class A common stock. In addition, the market’s expectation that conversions may occur could depress the trading price of our Class A common stock even in the absence of actual conversions. Moreover, the expectation of conversions could encourage the short selling of our Class A common stock, which could place further downward pressure on the trading price of our Class A common stock.

Current report

Provisions in the indenture governing the Convertible Senior Notes could delay or prevent an otherwise beneficial takeover of us.

Current report

Certain provisions in the Convertible Senior Notes and the indenture governing the Convertible Senior Notes could make a third party attempt to acquire us more difficult or expensive. For example, if a takeover constitutes a “fundamental change” (as defined in the indenture governing the Convertible Senior Notes (the “indenture”)), then investors of the Convertible Senior Notes will have the right to require us to repurchase their Convertible Senior Notes for cash. In addition, if a takeover constitutes a “make-whole fundamental change” (as defined in the indenture), then we may be required to temporarily increase the conversion rate for the Convertible Senior Notes. In either case, and in other cases, our obligations under the Convertible Senior Notes and the indenture governing such notes could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management, including in a transaction that holders of our Class A common stock may view as favorable.

Current report

The conditional conversion feature of the Convertible Senior Notes, if triggered, may adversely affect our financial condition and operating results.

Current report

In the event the conditional conversion feature of the Convertible Senior Notes is triggered, holders of such notes will be entitled to convert the Convertible Senior Notes at any time during specified periods at their option. If one or more holders elect to convert their Convertible Senior Notes, we may elect to settle all or a portion of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their Convertible Senior Notes, we could be required under applicable accounting rules to reclassify all

Current report

or a portion of the outstanding principal of the Convertible Senior Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

Current report

The accounting method for the Convertible Senior Notes could adversely affect our reported financial condition and results.

Current report

The accounting method for reflecting the Convertible Senior Notes on our balance sheet, accruing interest expense for the Convertible Senior Notes and reflecting the underlying shares of our Class A common stock in our reported diluted earnings per share may adversely affect our reported earnings and financial condition.

Current report

In accordance with applicable accounting standards, we expect that the Convertible Senior Notes will be reflected as a liability on our balance sheets, with the initial carrying amount equal to the principal amount of the Convertible Senior Notes, net of issuance costs. The issuance costs will be treated as a debt discount for accounting purposes, which will be amortized into interest expense over the term of the Convertible Senior Notes. As a result of this amortization, the interest expense that we expect to recognize for the Convertible Senior Notes for accounting purposes will be greater than the cash interest payments we will pay on the Convertible Senior Notes, which will result in lower reported income.

Current report

In addition, we expect that the shares of Class A common stock underlying the Convertible Senior Notes will be reflected in our diluted earnings per share using the “if converted” method. Under that method, diluted earnings per share would generally be calculated assuming that all the Convertible Senior Notes were converted solely into shares of our Class A common stock at the beginning of the reporting period, unless the result would be anti-dilutive. The application of the if-converted method may reduce our reported diluted earnings per share, and accounting standards may change in the future in a manner that may adversely affect our diluted earnings per share.

Current report

Furthermore, if any of the conditions to the convertibility of the Convertible Senior Notes is satisfied, then we may be required under applicable accounting standards to reclassify the liability carrying value of the Convertible Senior Notes as a current, rather than a long-term, liability. This reclassification could be required even if no noteholders convert their Convertible Senior Notes and could materially reduce our reported working capital.

Previous report

Solaris faces a variety of risks related to its entry into a new line of business following the completion of the MER Acquisition.

Previous report

Solaris’s entry into scaled distributed power solutions is expected to enhance Solaris’s position as a mobile equipment and logistics solution provider to the oil and gas industry as well as diversify its business.

Previous report

Entry into a new line of business may also subject Solaris to new laws and regulations with which it is not familiar and may lead to increased litigation and regulatory risk. Further, Solaris’s management team has not directly engaged in the distributed power solutions business before, and its lack of experience may result in delays or further complications to the new business. If Solaris is unable to successfully implement the acquired business of MER, its revenue and profitability may not grow as it expects, its competitiveness may be materially and adversely affected, and its reputation and business may be harmed.

Previous report

The market price for our Class A common stock following the closing of the MER Acquisition may be affected by factors different from those that historically have affected or currently affect our Class A common stock.

Previous report

Results of operations of Solaris following the completion of the MER Acquisition may be affected by some factors that are different from those that have affected Solaris’s results of operations in the past. Accordingly, the market price and performance of our Class A common stock is likely to be different from the performance of our Class A common stock in the absence of the MER Acquisition. In addition, general fluctuations in stock markets could have a material adverse effect on the market for, or liquidity of, our common stock, regardless of our actual operating performance.

Previous report

Solaris incurred significant additional indebtedness in connection with the MER Acquisition, which indebtedness may limit the Company’s operating or financial flexibility and could subject the Company to potential defaults under the applicable financing agreements.

Previous report

Upon closing of the MER Acquisition Solaris entered into a senior secured term loan agreement in the principal amount of $325 million to fund the MER Acquisition and the capital commitments contemplated at the acquisition closing date. Solaris also entered into a new revolving credit facility, which provides for borrowings up to the lesser of $75 million and a borrowing base determined by a percentage of eligibles accounts. These financing agreements could have negative consequences on Solaris, including, among other things, (i) requiring Solaris to dedicate a larger portion of cash flow from operations to servicing and repayment of the debt, (ii) reducing funds available for strategic initiatives and opportunities, working capital and other general corporate needs, (iii) limiting Solaris’s ability to incur additional indebtedness, which could restrict flexibility to react to changes in the business, its industry and economic condition following the Contribution, and (iv) placing Solaris at a competitive disadvantage compared to competitors that have less debt.

Previous report

Additionally, the financing agreements subject the Company to significant financial and other restrictive covenants, including, but not limited to, restrictions on incurring additional debt and certain distributions, as well as a certain leverage and minimum fixed charge coverage ratios Solaris must maintain. Solaris’s ability to comply with these financial condition tests can be affected by events beyond its control. If it is unable to remain in compliance with the financial covenants of the financing agreements, then amounts outstanding thereunder may be accelerated and become due immediately or Solaris may be unable to access the funds available. Any such acceleration or unavailability of funds could have a material adverse effect on Solaris’s financial condition and results of operations.

Previous report

The Company’s Solaris Power Solutions segment is dependent on its relationships with key suppliers to obtain equipment for its business.

Previous report

The power generation business is dependent on a limited number of key suppliers for access to the unique equipment used in the provision of the Company’s offering. If the Company fails to maintain adequate relationships with such suppliers or if it fails to receive equipment from its suppliers in a timely manner, then its competitive position may be harmed and its operations, financial conditions and/or cash flows may be negatively impacted.

Previous report

In addition, the prices of certain equipment may continue to experience inflationary pressures that could further increase such costs. The Company may not be able to pass on these costs to its customers, which could have a material adverse impact on its results of operations, financial condition and/or cash flows.

Previous report

Unavailability of, and lengthy delays in obtaining, the necessary equipment may result from a number of factors affecting the Company’s suppliers including capacity constraints, labor shortages or disputes, supplier product quality issues and suppliers’ allocations to other purchasers. These risks can be magnified in a weak economic environment or following increases in demand arising from an economic downturn, but are also generally present due to the nature of the Company’s business and its dependence on highly-specialized equipment. Such disruptions could result in the Company’s inability to effectively meet the needs of its customers and could result in a material adverse effect on operations, financial condition and/or cash flows.

Previous report

Many of the Company’s power systems involve long sales cycles.

Previous report

The sales cycle for the Company’s power systems, from initial contact with potential customers to the commencement of field delivery, may be lengthy. Customers generally consider a wide range of solutions before making a decision to rent or to purchase power systems. Before a customer commits to rent or purchase power systems, they often require a significant technical review, assessment of competitive offerings and approval at a number of management levels within their organization. During the time the Company’s customers are evaluating its offerings, the Company may incur substantial sales and marketing, engineering, and research and development expenses.

Previous report

The Company’s customers may not continue to outsource their power system needs.

Previous report

The Company’s customers can evaluate a wide range of applications and equipment to address standby and/or prime power generation needs. As a result of the significant resources and expertise required to develop these systems, certain of these customers have historically chosen to outsource the provision of power generation to the Company. To a significant extent, the Company depends on customers continuing to outsource their power generation needs. Customers may not continue to outsource as much or any of their power generation needs in the future or may seek alternative solutions.