David Grzebinski: The short answer is, yes, of course, it’s an area for M&A. But, in terms of the technology, at data center, it’s generally standby power. They’re not running prime, they’re not generating power, generally speaking for their own use. It’s really just backup. So diesel, power – diesel-powered backup power is a good fit for that. That said, with natural gas, the operating costs of natural gas are cheaper. The problem with the data centers is, just getting the natural gas to the data centers. That said, obviously, with natural gas prices being cheap, everybody is looking for ways to burn natural gas. I think that is actually helping the prime power kind of efforts. People see that, if you can get natural gas cheap, you can generate power pretty cheaply and sell it to the grid at the right time.
So we’re seeing a lot of interest in that. We’re agnostic. We build anything. We’re, again, that’s our strength is packaging what the customer needs for their specific application. And I would just tell you that the variety of applications is enormous. You can imagine that a Walmart target has a different view of how backup powers could work versus, a fracker versus a data center versus, a Bitcoin mining shop. We try to be agnostic to it. Look, we’re excited about this space. We’re looking for ways to grow it. Obviously, there’s a lot of inherent growth, which is pretty much limited by, engine availability, but clearly, we’d be open to vertically integrating and adding some ability to add our share of wallet in terms of packaging.
Greg Wasikowski: Got it. And big pie out there for sure. I appreciate the color. Next one, pretty similar, and I think I’ve asked you this before, but can you talk a little bit about growth for the backup power? And I think I’m speaking mostly to the rentals or temporary. And I mean, I’m no meteorologist, but I keep hearing that, we’re on pace for hottest summer of the year and potential, worse than normal extreme weather for later in the year and who knows if that’s true or not. But, is that something that, Kirby, is that actionable for you guys? Is that something you can prepare for? And how does that play into ultimately like, growing that segment or does the, uncertainty of the weather kind of make that too difficult? How do you think about that?
David Grzebinski: Yes. No, Greg, we were all grinning here because you can imagine our marine fellows do not like adverse weather and hurricanes, but our power rental group loves hurricanes. And so we kind of have a smile on our face as we think about that because we hate hurricanes for all the right reasons in the marine business and from a, just the impact to people. But yes, we do rent a lot of large power and a lot of that power that we rent is kind of on a standby basis that, they pay a standby fee and then once it’s deployed in a hurricane situation or an adverse weather circulation, the rate goes up considerably. We have a fairly large power rental fleet. Last year, we expanded that a bit. I think we spent about $10 million in new capital to build new power generation.
We continue to build new power generation capabilities for rental. But, that’s a small part in terms of our power generation revenue. The bigger pieces are packaging for whatever application. Hopefully.
Greg Wasikowski: Okay. Helpful context. Yes, no, I appreciate it, guys. I’ll turn it over there.
David Grzebinski: Thanks. Greg.
Operator: [Operator Instructions] Our next question comes from Adam Rosowski of Bank of America. Your line is now open.
Unidentified Analyst: Hi, thanks. Good morning, Dave, Raj, and congrats to Christian. I’m on for Ken Hoexter today. Maybe just…
David Grzebinski: Good morning Ken.
Unidentified Analyst: Good morning. Maybe just starting with the inland spot rate momentum, trending up mid-teens, what’s your view of the base case for continued momentum here? And is it, fair to think that these could turn into similar levels of contract gains later in the year?
David Grzebinski: Yes. Look, we’re in a very healthy market that, as Christian said, this is one of the best environments we’ve seen in a very long-time. I would tell you that the good news is that spot rates are well-above term rates, probably 15% above term, which is what you want in a healthy market that, that, that way you have some ability to raise term pricing. That said, our customers are very sophisticated. They understand what’s going on with the maintenance bubble. They understand what’s going on with inflation and how we need to recover that. And it’s, I would say the rate momentum for term contracts should continue kind of like we saw, I think we said in our prepared remarks that year-over-year term contracts that renewed in the quarter were up double digits, low double digits. So I would suspect that go – I don’t know. Christian, you want to add anything to that?
Christian O’Neil: No, I think that’s well said. I think, the momentum we see is real. The pricing that the industry needs to get to, get to a replacement capital or the point where people are reinvesting again, there’s still – there’s still room to go. We’re seeing that in the spot market, and we’ll continue to press and try to cover our inflationary pressures with our term renewals as the year continues?
Unidentified Analyst: Great. Very helpful. Thanks. And then just on the barge addition in the quarter, you added 13 barges. Is this just private owners looking to sell more? Can you talk about how that transaction developed? And if there’s potential for any more down the road here?
David Grzebinski: Yes. I mean, periodically, we have various people that want to sell for various reasons. I mean it could be that they just have some excess equipment, they could have, some cash flow needs or whatnot. This is – we did several of these type last couple of years. We do them opportunistically. We’ve stepped into, shipyard contracts for people with – we’ll take – look, our ecosystem knows we’re a logical buyer and we get the opportunity to get them. I’ll let Christian talk to the desirability of what we just got. That is kind of a home-run.
Christian O’Neil: No, thanks very much, David. The opportunities to acquire two high-horsepower river linehaul class vessels is really fortuitous for us. We’re very happy to have them. They improve our fuel efficiency, our performance, our emissions footprint in our big line haul operation. And the 30,000 barrel barges and specialty barges, fit right into what we do and we’ll feather that equipment into the portfolio here in about the next 30, 60 days very easily.
Unidentified Analyst: Appreciate the time.
David Grzebinski: Thanks, Ken.
Operator: One moment for our next question. Our next question comes from Derek Podhaizer at Barclays. Derek, your line is now open.
Derek Podhaizer: Hi, good morning, David. I appreciate you letting me on the call.
David Grzebinski: Yes. Good morning, Derek. Glad to have you.
Derek Podhaizer: Thanks. Just wanted to ask about your outlook on e-frac pumping equipment. Your message being constructive on the power generation side. But could you talk to us about customer conversations ordering potentially additional e-frac equipment or potentially new customers that you’re speaking with looking to acquire some of the e-frac equipment, or do a leasing model? Just maybe some more thoughts and color on that.
David Grzebinski: Sure. I would tell you that it’s very active on the e-frac side. The – nobody is really building conventional fracs anymore. I think, I don’t know if it’s dead forever, but it’s hard to see people building conventional fracs going forward. I think some people have converted, and we were involved in converting a lot of conventional fracs over to DGB, dynamic gas blending units. And it’s really just about economics, right? I mean burning gas is so much cheaper than burning diesel, and electric takes it to the next level, right? I mean, you’ll see, not only is it cheaper to operate, you’re burning 100% natural gas, but the maintenance cost goes down for the operators as well. That’s not to say it’s simple equipment.
I mean, it’s just very sophisticated equipment. So it’s a long answer here, but we are seeing continued demand. And I would say, they’re not expanding the frac horsepower that it’s really replacement at this point. If anybody has got some old frac equipment that they’re going to cut up, they’re going to replace it with electric. So we’re seeing new demand. We’re seeing it from existing customers and potential new customers. And we’re pretty excited about it. We think we’ve got the best widget out there. Obviously, other people think the same. But, I would put our equipment up against anybody. It’s state-of-the art and we’re excited about it. We have done some leasing. I think we’re pretty happy with our lease portfolio and we’re not anxious to add to it.
Now, we’ve deployed quite a bit of capital in that space. But we are seeing a lot of activity and interest in electric frac.
Derek Podhaizer: Yes, I appreciate that. And do you think – are you happy with kind of your capacity cadence as far as ability to get X amount of e-frac pumps out per year? Do you see that expanding over time as more and more of the pressure pumping companies adopt to this, next generation frac equipment.
David Grzebinski: Yes. I’d love to give our manufacturing guys the challenge. I mean, I think we’ve got an evening shift. I’d like to go to 24/7 to expand. But, we’re supply-constrained more than anything right now. Yes, it’s the same, same type of engines that you see for power generation, right? I mean, we’re talking about natural gas resift engines, and they go, they generate the electricity on the well site and those same engines are being used as we talk about in other power generation activities. So we’re supply constrained more than anything. Again, if we could get more engines, we’d certainly take them.
Derek Podhaizer: Great. Thank you, David. Appreciate the color. I’ll turn it back.
David Grzebinski: Thanks, Derek.
Operator: This concludes our question-and-answer session. I would now like to turn it back to Kurt Niemietz for closing remarks.
Kurt Niemietz: Thank you, Amber, and thank you everyone for joining us today. Should you have any follow-up questions, please feel free to reach out to me.
Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.
