Change Makers: Nathan Ough, VoltaGrid CEO

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Hill Vaden:

All right. Welcome back to EnergyCents, an S&P Global Commodity Insights podcast covering all topics on the intersection of energy and finance. This is your host, Hill Vaden here as usual with Sam Humphreys. How's it going, Sam?

Sam Humphreys:

I'm pretty good, thanks, Hill. How are you?

Hill Vaden:

I'm doing well. You're in London today.

Sam Humphreys:

I am. Thought I'd come in and see some lovely colleagues. It's great. The sun came out as well. Who knew? London in summer is great. It's not as hot as Houston.

Hill Vaden:

But we do have air conditioning, which is pleasant. So we have another Change Makers episode today and we are lucky enough to talk with Nathan Ough,​​ the CEO of VoltaGrid, which is a remote and grid parallel power provider working with modular natural gas kit, which got its start in the oil field and is working very closely now with artificial intelligence data center projects. And we've been talking with Nathan through email for quite some time and are really excited to finally get him on. Can you give people some things to listen to?

Sam Humphreys:

Absolutely. So this company is fascinating. It has grown very significantly in quite a short space of time, so like you said, 2020 to today. I think it's got 1,500 people now as of today, all in with contractors. Let's clarify that. But it is fascinating how much capital they've managed to raise in that time and to expand. And I think he even said that he started in oil fields and then has emerged into this AI data center space. And that is growing rapidly as you would expect because all we talk about is AI at the moment. So power demand is rapidly increasing and they're offering a reliable solution outside of the grid. And there's lots of exciting things that sound like they're on their way with the company as they continue to grow. But what about you? What did you think we should be listening out for?

Hill Vaden:

I think these whole distributed generation concepts are particularly interesting. I think VoltaGrid and there's a handful of others that have done a really good job leveraging natural gas within this. And like you say, the transition from the original oil field application into some of the data center, Nathan does a really good job describing it and we can hand off to him now.

Sam Humphreys:

Enjoy.

Hill Vaden:

All right. Well, Nathan, thank you so very much for joining us today for a conversation on VoltaGrid. And as I mentioned before we started recording, I am a little bit star struck by the opportunity to speak with you about VoltaGrid today because I think VoltaGrid is one of these great exciting stories of energy innovation coming out of Houston. And so I'm a little bit biased as a Houston homer here. So one, thank you. And two, for our listeners, can you introduce VoltaGrid and kind of pitch company for the uninformed listener?

Nathan Ough:

Yeah, absolutely. Yeah, I appreciate you guys having me on your show and really do look forward to being here. And I think it's a great opportunity to tell the story and really tell a true entrepreneurial American inc. story that's grown rapidly over the last four years.

So if I look at VoltaGrid where it sits today, I summarize it as one of the largest portable energy infrastructure companies in the United States. And so we have the largest portable power generation business in the US. That business sits today at around 1,500 megawatts of deployed power growing to 2,000 megawatts here in the next kind of 12 months.

In parallel to our portable power generation business, which I kind of claim as one of the largest portable utilities in America, we've built out a very large CNG infrastructure and terminaling fuel business in the US predominantly to generally fuel ourselves. So we're vertically integrated from natural gas sourcing, compression, logistics, distribution, and then the generation side of the business.

But what's really unique and something to highlight about the infrastructure in fuel business is that it's become the largest CNG business in the United States purely to feed the largest portable power company in the United States. And so it's a really neat claim to fame. And we built that portable CNG company to the largest in the US in the last two years just to put it in perspective. And so just a monumental amount of work that's been put into that. But it's made us incredibly successful because we're turn-keying both natural gas fueling infrastructure and portable power generation infrastructure.

And then the third arm, which is a really exciting arm for us is large scale microgrid power builds or permanent infrastructure for our rapidly growing data center business in the US. Obviously the US grid is under a lot of constraint issues, whether that's actual physically supplying the electrons or supplying the electrons at a voltage and frequency deviation that's required by the next GPU chips. And so really excited about that business. That business today is fairly small. I think it sits at 200 megawatts, but by this time next year that business will be growing at 200 megawatts almost every single month accordingly.

And so really exciting, we're making one of the largest capital investments in the US for power generation. We'll spend over a billion dollars this year. And then as we look over the next two years, we'll be deploying potentially up to about $6 billion of capital.

Sam Humphreys:

I mean that is a fascinating growth story. So how has the company grown to this? So obviously that takes quite a lot of investment and I believe it's a PE-backed company. Can you just explain some of the journey that you guys have been on?

Nathan Ough:

Yeah, absolutely. So we started realistically in Q1, 2021. It was me and me and a couple buddies taking the hat around, filled the hat with whatever money we could get because we've already mortgaged everything and pushed all the chips in. And because of our track record of our first company, which was called Certarus, that ended up selling to Superior Propane, which is partially owned by Brookfield, we had a good legacy of really creating value for shareholders.And so once you've got a track record of that, capital does flow to good management teams and good ideas. And I truly believe in that moment we kind of had both.

And so Q1, 2021, closed on our first equity raise. That was around $75 million. That was purely raised by us. We didn't have a bank, we did it ourselves and really brought in some world-class investors in that first round, one of them being Longbow Capital out of Calgary. They backed me on my first startup. They are PE, but I call them really, a really friendly PE, supportive PE, truly wants the best for the business. And so I view them as the unconventional PE if I could explain it that way.

And then we had really a lot of strategics. We had a very unique capital structure from day one where very light on PE and very heavy on strategics. And so you saw investors like Halliburton come in. You saw investors like the Canadian Pension Plan come in. That's a $700 billion fund out of Toronto and New York. You saw a pilot which is backed by Berkshire Hathaway come in. And so just a really unique situation where we had a lot of alignment both from a growth perspective and achieving shareholder returns, but really alignment to actually build a really badass company from day one. And that I truly believe set us up for the right stage to grow with deep pocketed investors.

And we have grown, I will tell you that. I remember Q1, 2021, we had eight people. I was doing payroll, literally entering payroll myself because somebody has to do it. And today if I include contractors that work in our manufacturing plants, I think we're up to 1,500 today.

Sam Humphreys:

Wow, that's a lot.

Nathan Ough:

Yeah. Full-time employees is 1,000. And so I keep saying we're America's fastest growing company. Might not be the correct statement, but we are like in the top snack bracket of fastest growing companies and having a ton of fun, just totally having a ton of fun.

Hill Vaden:

And can you walk through some of the process since 2021. Am I right? So Halliburton is a big investor and I think recently maybe increased its investment and you guys started in the oil field application, is that correct?

Nathan Ough:

That's right, yeah. So we started out where we designed a very purpose-built platform for high-transient response electric frac pumps for Halliburton and really have a fantastic partnership with them that's expanded to about half of Halliburton's frac fleet. I think that's public information in the earnings call yesterday. And just a great fantastic business for us. It's like the three-legged stool. It's great frac pumps via Halliburton, great power generation with VoltaGrid and integrated fuel distribution with VoltaGrid.

And so I call it the three-legged stool for success. And that has really propelled our business to almost, give or take, about a billion dollars of revenue a year in the conventional business. But what you're seeing is is all our lessons learned from providing a high-transient response power business for oil and gas be applied to a high-transient response power business for AI compute because the next generation chips have very, very high volatility in their power profiles.

And so I feel like we started in the hardest industry first an where you have to move power plants around in 24 hours and I'm sucking silica sand into our engine air intakes and we're going down lease roads that look like ski moguls, and we're in the desert and it's hot and any spare parts are an hour away to this environment where I'm building a power plant on a concrete pad in the middle of a city and have incredible access to talent, people, parts, labor and don't have to move it. And so we're super excited about the transition that's happening.

Sam Humphreys:

So that is something I really wanted to ask you about because on the face of it, it is the opposite way round the way you would expect a business to grow. You'd think start easy, go to these remote places. Was it the partnership with Halliburton and their investment that led you to start out with the oil field services or was there something else? Why start there and not the nice concreted urban areas that have easy access?

Nathan Ough:

I totally agree. I know I think about that. But the truth is we started because we identified a great partner, a great business opportunity and knew that electric completions or electric fracking would alter to the positive environmental impact, a total cost to ownership to the producer and really enable really next generation efficiency gains at the wellhead. So we knew that that is a smart business.

And I do say it this way, back when I was starting this company in 2021, the whole world was running to solar panels and wind farms and all the renewables because energy transition was like the number one thing. And if you look today and you reflect back, I'm not debating that energy transition has to happen, but what you're seeing is it's not energy transition anymore, it's energy addition. It's stacked layers of energy. And great businesses, both from an environmental standpoint and an economic standpoint, will go in and recognize that look, fossil fuels aren't leaving the energy stack in my lifetime at the very least.

And so those that go in and clean and reduce the carbon footprint of that segment of the energy stack will be an incredible business. And so we focused on that by reducing emissions of the oil and gas industry, increasing efficiencies, which proved to be an incredible business. And so we've got a great environmental impact, positive statement. We're lowering costs, we're increasing efficiencies. That just proved to be economically a great business and didn't have to take a single dollar from the government to do it.

So you get this momentum that's growing off of that fundamental business and now you've taken all of that pillar of success and you're going to walk it into the AI industry. But what I'll tell you is in 2021 and 2022, we didn't have a single data center in our sales pipeline. And I remember the time that my sales guy walked into my office and he said, "Hey, I know you told me to sell the utilities, but do you know what a data center is?Because I just got a phone call from one and they need power." And I was like, "Oh, what's a data center?"

And so then in that moment it was like ... And we pivot fast. I will tell you that out claim to fame is when we think of something, it's a good idea, we're like, "Go, by lunch. Go do it by lunch." And so I remember that was at 10:00 AM and by like 4:00 PM, marketing had a data center page on our website. We pivoted our entire sales strategy. And by the next morning we were starting to call data centers being like, "Do you have a power problem?" And I remember the first 10 phone calls, everybody's like, "No, we're good, we're just fine." And then all of a sudden they started calling back. Over the next six months, they were like, "Hey, can you actually do what you said?"

And in that moment we realized we need to go all in on this as hard as we possibly can and go right now. And don't go down the path that everybody goes down, which is just acknowledge that America ran out of power. Well, not really. America didn't run out of power. America ran out of the power quality and design and transient response and frequency ride-through that data centers require. That's what they ran out of. And so we started focusing on what do data centers actually need versus what do we think they need? And that's what's propelling our growth so incredibly right now.

Hill Vaden:

So talk a little bit more about that. I know you've got a relationship with Vantage Data Centers, one of the big ones. Data centers, most of them surrounded by diesel generators for backup? Are they looking at you for backup or are they looking at you for primary power? How should we think about this relationship?

Nathan Ough:

Yeah, six months ago, I'd say 60% of my sales pipeline was bridge power to grid and probably short in duration, maybe one year, two year, three year, four year, something like that. Okay? Today my entire pipeline is inverted itself where most of the transactions we're working on now is we're just not going to connect to the grid. We can do it cheaper with VoltaGrid. We can get better power quality, we can get faster timelines, we can get guarantees of power quality, we can get guarantees on delivery.

And so we can both provide a physical product better than the utilities and we can provide a financial product that's better than utilities when you think about guarantees on delivery and performance. And so you present that landscape, you present a landscape where we're abating emissions by 98, 99% in most cases if you think about CO, VOCs, other regulated emissions in the US. And so you now have this platform where you are a lower environmental footprint than the grid. You provide more certainty on timeline and performance and a lower cost. That is like the perfect ingredients to have a successful business, and we did it.

Sam Humphreys:

I mean it's very cool. The services you're offering for the data centers, is this the microgrids that you're talking about? And is this natural gas powered or are you using a combination here of a different power sources to generate the power that you're then optimizing to all the customers?

Nathan Ough:

I would say given the power profile of our customer in the target customer that we're going after, which is very heavy AI compute loads, everything is natural gas. But I'll give you an example, 30% of our capital spend on a AI data center power plant is air scrubbers. So we're really taking a very conscious approach to environmental impact, and so investing very heavily in that. And so yes to natural gas, could we burn hydrogen? Yes. The truth is America doesn't produce enough hydrogen today to actually do it, but we can run roughly 35 to 40% hydrogen in the platform, but money is better spent in air scrubbers. That's the truth because it's a one-time capital item with very low OPEX. And so focusing capital on the best, what I call environmental rate of return, which is air scrubbers. And so all natural gas.

The role of renewables for us as you think about energy addition versus energy transition is that the variability of response or inability to have dispatchable power of renewables really handicaps the ability of renewables to play a role because we have to still build the dispatchable infrastructure when the sun doesn't shine or the wind doesn't blow. And so you end up over-capitalizing the project. And so this is really driven from economics and data center requirements, but also being mindful of environmental impacts, thus the correlation to the very large investments we make in air scrubbers.

Hill Vaden:

Can you talk a little bit about your supply chain? So there's obviously gas, big picture, has had a real rebirth over the past, I don't know, 18 months or so. But the gas turbine, if we were going to talk about building a big power plant with the traditional turbine, we're waiting five years. How is your supply chain working? Is this all domestic and then there's tariffs and all the other things? Can you give us a little color on this?

Nathan Ough:

Absolutely, yeah. Look, we do not focus on building the large scale CCGT turbines. Other people do that better than we do. Okay? There's also an incredible debate going on right now of does the CC of the CCGT actually work under AI loads? And it's becoming very evident that the combined cycle portion of that infrastructure doesn't work in a high volatility power requirement. And so yes, if I was attached to a cloud load, which would be very steady state power, it would be just fine. But in an AI training model where you have extreme transients, the CC doesn't work.

And then what you happen to do is you drive a turbine solution to just a simple cycle platform, which then the great debate is, well, what is the best asset out there, right? Conventionally you'd say, "Ah, big turbines." But you have this exposure rating, which is effectively a function of what is the power drop off if you have a shutdown of a single generator source. Which then drives you to, okay, smaller nodes are better because there is no grid to back you up. If you shut down the power plant, that compute stops.

So you take all of that, and I know I'm ending up in supply chain, but you take all what we deem as actual factual information to make a proper business decision on. Okay, so take all the fluff out because in my opinion, 90% of what you hear in data center land is wrong and you focus on what's actually correct. When you focus on that, you realize that that five to 10 megawatt generator node size for power generation for data centers is great in the scale.

And so we've taken that approach and built an entire supply chain around designing an internal developed product called a Qpac, which is effectively a 25 megawatt power node for data centers. It has extremely high transient response, has integrated air scrubbers, has everything that is required to perform successfully for a data center. And because of that, we manufacture those in Dallas. Dallas and Houston are our two manufacturing hubs.

So we get a naked engine from Europe or an engine and an alternator from Europe or from the US, ship it, Indiana, ship those two products to Dallas or Houston depending on what the manufacture is and turn that into a VoltaGrid design product. And so we own the IP on that, own the supply chain on it. And so we don't really compete against other developers because we manufacture or outsource the manufacturing exclusive to us, our own product line. So we have a very tight hold on our supply chain and then also spec build quite a bit. And so it enables our lead times to be incredibly short for power. It's a very long answer, but I had to tell the story to get there.

Sam Humphreys:

It's a good story. I'm going to just drift slightly away from it now though, because you mentioned bringing in the air scrubbers to reduce emissions and one thing that your company states is the reduced emissions by employing some of the technologies and services that you have to offer. But then on the other end of that, are you monitoring emissions from your power grids? And how is that playing into the customers? How do they get that information?

Nathan Ough:

So in the United States, any minor or major source emissions, it has to be recorded. That's how your permitting laws work. And so when we talk about abatement of 98, 99%, that is actually both engineered factory OEM guarantee, it's also a third party verification test requirement. That test requirement has to be done on a yearly basis and submitted to the regulatory bodies. And then you also have to do recorded emissions measurement depending on how you file in real time, and that is sent in.

And so for us, when we actually talk about reducing emissions and reducing emissions by a certain percentage, that is something that we are filing with the EPA. Or if we're, say example building in Texas, we're filing with TCEQ, and we are liable to deliver to that number or less than that number. It is not a debate because it's a regulatory requirement based off your air permitting regime. So when we talk about it, we're doing it.

Hill Vaden:

So careful listeners will notice a language dialect giving away your Canadian heritage. You're obviously talking about Texas and some of the operations here. Are you thinking bigger? Are you looking, are there VoltaGrids in other parts of the world that are doing things like you all? Is there fertile ground for expansion?

Nathan Ough:

Yeah, so originally from Canada, originally from the East coast to Canada, Saint John, New Brunswick, so small little town. And then did a trek across the country between Toronto and Calgary and then decided I wanted to move to Houston and ended up in Houston.

And so when we think about expansion, look, the US for us is an incredible market, growing rapidly, growing almost to the point at which we can't fully satisfy the pipeline. That being said, you can't dangle a carrot in front of an entrepreneur and not think he's going to chase after it. And so we are heavily looking at expansions into Canada right now. It's kind of a natural fit for us. Part of our supply chain comes out of Canada. I think we probably got 10 or 15 Canadians on the payroll. And then half our capital has come out of Canada. And so naturally quick expansion for us in that region.

We are heavily looking at the Middle East right now as well. That is a super attractive market today, whether it's both from an oil and gas perspective or an AI development perspective, but both are in our wheelhouse. And so that to us is Canada, Middle East are two very attractive markets. Will we be there in 12 months? Probably not. Will we be there over the next five years? If I have any voice in the matter, I really hope we do, put it that way.

Sam Humphreys:

And so when we talk about the growth potential, the expansion for VoltaGrid, you've touched on oil field services and you've touched on data centers. Which one are you seeing in the near term that's going to be the biggest area of growth if you're just sticking within the US?

Nathan Ough:

Look, our oil and gas business today is probably 70% of our business. A year from now, it'll be less than 50. A year from that, it'll be less than 30. But that's not because the oil and gas business shrank, it's because our other business lines have grown that much. My heart is very much still in the oil and gas industry and I don't think you can forget who made you, what industry made you. And so for us, we are very excited to continue to invest in that business. We'll continue to invest in it. We'll continue to employ 800 plus people in that business and hope to grow it. It won't grow as fast as the data center business just because the data center business is very chunky in size.

But really excited to invest in both parallels, quite honestly. Being diversified across multiple industries, for us, we're in the oil and gas industry, we're in the mining industry, we support the US government and various operations, obviously booming in the AI development side. And so just overall that footprint would lead to just a very well-diversified entity.

Hill Vaden:

All right, so just to kind of wrap up the conversation, we like to finish these discussions with a milestone or an event to watch for from, in this case VoltaGrid over the next six to 12 months or something outside of VoltaGrid that is going to impact the trajectory of VoltaGrid. Can you give us one or two examples, something to keep our eyes out for?

Nathan Ough:

Look, I think there are a lot of incredibly exciting things on the horizon and I would encourage everybody to pay attention to the story as we look at over the next two to three months in the horizon. Look, the US AI race against other global peers is a very real effort to win by the Trump administration. And you're seeing an incredible push from a federal level, from a hyperscaler AI compute level. And then you're seeing in the market, a lot of very large commitments for AI campuses across the US. And let's just say as those commitments are fulfilled, I think you'll see VoltaGrid play a very meaningful player or portion of those commitments.

Hill Vaden:

All right. Well, summer, it's July 24th and we know that you're busy. We know that you're trying to balance holiday or everybody tries to balance holiday around this point in their summer. So thanks so very much for making time with us. We're excited to watch the news from here forward and look forward to staying in touch.

Nathan Ough:

Awesome. Thanks, guys.