Undisclosed-value gigawatt-plus data center order lifts Enerflex gas-power backlog past 1.75 GW

Enerflex is based in Calgary, Alberta, and its shares trade on the Toronto Stock Exchange and in New York. It has about 4,500 employees and three product lines: Energy Infrastructure, After-Market Services and Engineered Systems.¹ Energy Infrastructure owns equipment and runs it for clients, who generally pay a monthly fee even when their production is disrupted. Engineered Systems designs and builds equipment to order in three North American plants with over 700,000 square feet of space. Its power offering ranges from 200 kilowatts to over 100 megawatts.²

In 2025 Enerflex had $2,571 million of revenue, and Engineered Systems made up $1,456 million, or 57%. No single client was more than 10% of 2025 revenue.¹ In the second quarter of 2026, revenue was $582 million against $615 million a year earlier, which the company put down to project timing and a shift of resources to its American rental compression fleet. Net earnings were $30 million, or $0.25 a share, and adjusted EBITDA was $128 million.² The Engineered Systems backlog reached $1,453 million at June 30, up from $1.1 billion at the end of 2025, and management called it the highest in its history; most of it was expected to turn into revenue within 12 months. Bookings in that unit were $971 million in the first half, a book-to-bill ratio of 1.5 times, meaning new orders ran well ahead of sales.³

The data center work did not start this month. In February Enerflex said it had an order for power generation units for a large data center in the United States, with deliveries into 2027. First-quarter bookings of $483 million included a newly awarded behind-the-meter power project for a data center.¹ On October 1 came the 450-megawatt order for a North American data center developer, and management said its power opportunity pipeline still topped 2 gigawatts. On September 30 Enerflex had closed the sale of most of its Asia Pacific operations, mainly After-Market Services work, to INNIO Group.²

Behind-the-meter means power made at the customer's own site rather than bought through the utility grid. On the day of the filing, the Wall Street Journal reported that data center developers are asking utilities and grid operators for unprecedented amounts of electricity. Utilities are answering with higher rates and collateral demands, and the paper said it has become hard to tell projects ready to build from ones that may never happen.¹ In its own risk list, Enerflex says barriers to entry in gas processing and compression are low, and that engines and other high-demand parts have long lead times that can delay projects.²

The October 13 release says Enerflex will design, engineer, fabricate and assemble over one gigawatt of low-emission, behind-the-meter gas-fired generators for a large North American data center development. The work will run through its North American plants.¹ Counting this order and the 450 megawatts announced on October 1, its behind-the-meter backlog is now above 1.75 gigawatts, with deliveries through 2028. A material change report filed the same day repeats these points.²

What the filings do not give is a dollar figure, a customer name or a margin for either order. That matters because gigawatts are not dollars, and the company counts its Engineered Systems backlog in dollars.¹ For scale only: at the October 12 close of $24.09, Enerflex's 122,102,883 shares were worth about $2.9 billion. Adding $455 million of net debt gives an enterprise value near $3.4 billion, about 6.4 times the $533 million of adjusted EBITDA over the year to June 30. Engineered Systems revenue was $300 million in the second quarter, down from $344 million a year earlier.²

Each side of the deal gives something. The customer gets generators built to order, and Enerflex hopes for later commissioning, installation and service work, which the release calls opportunities rather than contracts.¹ Enerflex commits plant time and money. As announced on October 1, it authorized about $100 million for its Engineered Systems facilities, unchanged on October 13; $15 million of that is already inside 2026 capital spending guidance of $185 million to $195 million. The other roughly $85 million is mostly expected in 2027, "if at all," in the company's own words.² That $85 million is about 37% of the $231 million of free cash flow (roughly, operating cash flow less capital spending) over the 12 months to June 30. Enerflex says the spending should "significantly increase revenue capacity" but gives no figure.³

The protections cut both ways. If an Engineered Systems project is canceled, its remaining contract price comes out of backlog. The release's own cautions say the projects must proceed on their contract terms, including the customer's obligations.¹ They also assume labor, equipment, parts and transport stay available on reasonable terms, and that Enerflex can deliver with its existing and expanded plants.²

The headline profit measure needs care. In the second quarter, adjusted EBITDA was $128 million, while EBITDA as reported was $94 million and net earnings were $30 million.¹ The adjusted figure adds back $19 million of share-based pay and $5 million of restructuring and deal costs, and adds $11 million of lease principal received. Share-based pay rose because the share price rose, so a higher stock can lift that expense again. A year earlier, profit included a $15 million unrealized gain on note redemption options, which makes the year-ago comparison look stronger than the business was.²

Cash and credit are ample for a program of this size. At June 30 Enerflex had $74 million of cash, $140 million drawn on an $800 million revolving credit line, and $660 million of available liquidity.¹ The credit line now matures June 30, 2029, and $400 million of 6.875% notes are due January 15, 2031. Principal of $540 million is due over the next five years if nothing is renewed. The company met its covenants at June 30.²

Its lenders' leverage test, net debt to EBITDA, stood at 0.8 times against a 4.0 times ceiling, and interest coverage was 5.4 times against a 2.5 times floor. On our own math, net debt was about 0.85 times trailing adjusted EBITDA, and about 1.1 times first-half reported EBITDA of $204 million doubled to a yearly pace.¹ The revolving credit line is secured and is paid ahead of the notes. Credit ratings were BB at S&P and Fitch and Ba2 at Moody's, all with a stable outlook.²

Dilution is modest. Enerflex had 122,102,883 shares on July 31 and 424,498 stock options at the end of 2025, and in March it registered 4,880,947 shares for its share unit plan, about 4% of the count.¹ It pays a quarterly dividend of 0.0425 Canadian dollars a share, and the $15 million of dividends paid over the year to June 30 took 6.5% of free cash flow.²

No regular-session close has printed since the 6-K was filed; the last close before it was $24.09 on October 12. The stock moved the same day: it traded at $26.61 at 9:35 AM and $27.54 at 3:55 PM on October 13.¹ Over the same span the energy fund XLE rose about 1.7% and AROC, an American compression stock in our price file, about 1.2%.² The October 1 order gave a preview: the stock closed at $22.775 on September 30 and $25.44 on October 1, then fell back to $23.69 by October 7. That gain faded below $24 within four sessions, so our call depends on the larger order and the October 29 results holding the price.³ Our price file starts in mid-September; the one earlier price in the filings is $21.70, the average of the high and low on March 6, 2026, used to register the share plan.⁴

The bull case is that Enerflex now has years of visible power work on top of a steady rental base. Its behind-the-meter backlog runs into 2028, its lenders' leverage ratio fell to 0.8 times from 1.3 times a year earlier, and 69% of second-quarter gross margin before depreciation came from its rental and service lines.¹ The roughly $85 million of new plant spending equals about 37% of the $231 million of free cash flow over the year to June 30, and most of it falls in 2027, so it can be funded from cash flow and the $660 million of available liquidity.² The Engineered Systems backlog was also already about $1.5 billion at June 30, before either autumn order.³

The bear case, in order of weight. First, price and margin are unknown; the unit earned an 18% gross margin before depreciation in the second quarter, fixed-fee projects shift cost overruns to Enerflex, and late delivery can bring penalties.¹ Second, a gigawatt for one development puts much of the power backlog with one customer whose name and credit are not disclosed, when in 2025 no client was over 10% of revenue; the release itself assumes data center demand stays as expected. Third, the plants must grow while engines and other parts can arrive late.² Fourth, an old dispute lingers: a customer on a terminated international project is in arbitration alleging breach of contract, and Enerflex still carries $161 million of related assets and a $31 million letter of credit.³

Management's own goals point further out. In May it said it competes in a market of more than $20 billion that it expects to grow about 6% a year through 2030. It aims to lift adjusted EBITDA margin, cash conversion and return on capital by at least 200 basis points (2 percentage points) each over a full cycle, with no date set.¹ It warns those gains may come late or not at all. For 2026 it also targets 10% to 15% growth in its rental compression fleet in the United States.²

The first test is October 29, when third-quarter results come out before the market opens, and the company has said it will update its 2026 capital program then. Both orders were announced after the September 30 quarter end, so the September backlog may not show them.¹ A power backlog that never shows up in dollars, a slide in Engineered Systems margins, or a capital bill well beyond the $100 million already approved would undercut the bull case. Deliveries from 2027 to 2028 are the longer test.²

Neither the October 1 nor the October 13 filings put a dollar value, a price per megawatt or a margin on the orders, so they cannot yet be set against revenue or profit.

The new customer is described only as a large-scale North American data center development, and the October 1 buyer only as a North American data center developer. The filings do not say whether they are the same party or how strong its credit is.

The filings do not say whether the customer pays deposits or progress payments, or what it owes if it cancels. They say only that a canceled project's remaining price leaves the backlog.

The filings do not name who supplies the engines and generators for these units, or whether that supply is locked in for deliveries through 2028, though Enerflex warns that engine lead times can delay projects.

Enerflex has not disclosed the price, cash proceeds or gain or loss on the Asia Pacific sale it closed on September 30.