Power Grab

Archrock has agreed to acquire microgrid infrastructure provider HiVolt Energy Holdings (HiVolt) in an all-cash transaction valued at up to US$450 million. The transaction includes US$415 million in cash at closing and up to US$35 million in earnout incentives tied to commercial milestones. The deal is expected to close in early 2027, pending regulatory approvals and customary closing conditions.

The acquisition expands Archrock beyond natural gas compression and into the prime power microgrid market. HiVolt’s portfolio includes behind-the-meter power generation, battery energy storage systems, fuel gas pipelines, and private-line infrastructure.

Archrock expects HiVolt to generate US$70 million to US$75 million in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2028, with about 70% of that supported by operating and contracted or awarded opportunities. Archrock values the deal at about 6.1 times the midpoint of that estimate. The company will fund the US$415 million upfront payment from its asset-based lending (ABL) credit facility, expects pro forma leverage to stay within its target range of 3.0 to 3.5 times, and expects the deal to be immediately accretive to earnings per share and cash available for dividend per share.

“Combining HiVolt’s proven prime power microgrid platform with Archrock’s natural gas compression offerings will transform our company into a broader provider of energy infrastructure,” said Brad Childers, president and CEO of Archrock, in the company’s November 10 announcement. “HiVolt has built a proven, differentiated platform in the energy microgrid market that complements our core compression business and will enable us to provide additional essential services to customers across the energy value chain, particularly in power-constrained geographies.”

During Archrock’s November 10 conference call with investors, Childers described the transaction as the next step in the company’s long-term strategy.

“Combining that platform with our leading natural gas compression capabilities is an important next step in our strategy to power a cleaner America,” said Childers. Later in his remarks, Childers added, “Together, we’re creating an integrated energy infrastructure platform that can meet more of our customers’ needs, particularly where grid power is constrained.”

Founded in 2019, HiVolt develops, owns, and operates permanent behind-the-meter microgrids that provide utility-grade power under long-term power purchase agreements. The company currently has more than 80 MW of contracted prime power capacity and more than 50 miles (80 km) of private-line infrastructure concentrated in the Permian Basin, where Archrock maintains its largest operating presence.

HiVolt’s power purchase agreements are take-or-pay style, capacity-based contracts with initial terms of five to eight years. HiVolt also has access to more than 500 MW of near-term generation equipment using Caterpillar engines and has enough equipment on order to support its forecast growth through 2028.

“What makes this combination particularly compelling is its foundation in oil and gas, an established prime power microgrid business serving customers we know under long-term power purchase agreements,” said Childers. “That gives us a clear opportunity to expand our energy infrastructure offering today with potential future upside from other markets.”

According to Childers, customers increasingly require reliable electrical power that cannot wait for traditional grid expansion.

“Average interconnection waits are approximately five years in major markets and up to seven years in some markets. Oil and gas behind-the-meter power is the primary end market serving upstream and midstream customers,” said Childers.

Archrock estimates the US oil and gas behind-the-meter power market at approximately 10 to 13 GW. “These customers need reliable power to support their operations and electrification plans. HiVolt’s prime power microgrid infrastructure addresses that need and broadens our ability to serve customers’ compression and power infrastructure requirements,” said Childers.

Archrock is targeting oil and gas customers first. “I want to be really clear that the investment thesis with HiVolt is to expand this microgrid offering of prime power infrastructure and utility grade power to primarily the oil and gas market, first and foremost, with midstream and upstream customers,” said Childers.

After closing, HiVolt will continue operating as a separate business segment under CEO Josh Evans. Archrock plans to maintain HiVolt’s organization and Midland, Texas, presence while supporting geographic expansion into other producing regions.