WULF - NASDAQ

Greetings, and welcome to TeraWulf Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. John Larkin, Senior Vice President, Director of Investor Relations. Thank you. You may begin.

Thank you, operator. Good afternoon, and welcome to TeraWulf's Fourth Quarter and Full Year 2025 Earnings Call. Joining me today are Chairman and CEO, Paul Prager; CTO, Nazar Khan; and CFO, Patrick Fleury. Before we begin, please note that our remarks today may include forward-looking statements. These statements are subject to risks and uncertainties, and actual results may differ materially. Words such as anticipate, expect, believe, intend, estimate, project, could, should, will and similar expressions are intended to identify forward-looking statements. For a discussion of these risks, please refer to our filings with the SEC available at sec.gov and in the Investor Relations section of our website. We will also reference certain non-GAAP financial measures. Reconciliations to the most comparable GAAP measures are available in our earnings release and filings. With that, I'll turn the call over to our Chairman and CEO, Paul Prager.

Thank you, John, and good afternoon, everyone. 2025 was a defining year for TeraWulf. We said we would transition this company into a scaled power-backed AI infrastructure platform, and we did. Our strategy is simple and disciplined, control energy advantaged sites, engineer infrastructure around power and contract long-term credit-backed AI capacity. Everything we did in 2025 supports that strategy. First, we acquired 100% of Beowulf Electricity & Data, eliminating related party complexity and fully integrating power generation expertise into our platform. In today's market, power is the gating factor. If you don't control power, you don't control your destiny. We do. Second, we secured long-duration site control at Cayuga, up to 400 megawatts at a retired coal facility with real grid infrastructure already in place, brownfield, power backed, scalable. That's our model. Third, we signed a 450-megawatt lease with Fluidstack supported by Google's credit. That was a platform-defining deal. It validated our model, our execution capability and ability to contract at scale. With Google's warrants, it will be our largest shareholder. That alignment speaks for itself. Fourth, we replicated the model in Texas through the Abernathy joint venture, proving portability across power markets. And fifth, we executed the WULF Compute and Flash Compute financings. These transactions demonstrated that contracted credit-enhanced AI infrastructure supports scalable and repeatable capital structure. Operationally, we delivered WULF Den and CB1, began recording HPC revenue and have now delivered CB2A for Core42. We are building, delivering and contracting simultaneously. And since year-end, we added approximately 1.5 gigawatts of additional power back capacity in Kentucky and Maryland. Now let's talk about what actually differentiates us, power and execution. The AI build-out is not constrained by GPUs. It is constrained by power, interconnection, transmission and increasingly new generation. That's why Morgantown matters. Morgantown is not just another data center site. It is a former coal generation facility in the Washington, D.C., Northern Virginia corridor, one of the most power-constrained data center markets in the world. Our Phase 1 vision includes approximately 500 megawatts of new dispatchable generation, 250 megawatts of battery storage and 500 megawatts of data center load, followed by a similar Phase 2. Critically, the site is being engineered to operate as a net generator to the state. We are not just consuming capacity. We are adding it in constrained markets that is the only sustainable model at scale. This industry is moving towards integrated bring your own generation campuses. We are well ahead of that curve because we are fundamentally a power company that builds and operates digital infrastructure, not the other way around. We know how to permit generation. We know how to build generation. We know how to operate generation. We understand grid behavior, and we know how to integrate generation, storage and compute in a way that works for customers and regulators. There are very few teams that can do that credibly and at speed. We are premier among them. Turning to Kentucky. Demand is extremely strong. We are engaged with every major hyperscaler and several large AI compute platforms. A data room is open, diligence is active. Conversations are robust and substantive. This week, we met directly with Governor, Beshear and state leadership. The alignment at the state and local level is clear and constructive. Kentucky understands the economic and strategic import of power backed AI infrastructure. This is 480 megawatts, a campus with immediate power availability, expansion potential and strong state support. We are excited and highly confident in the long-term value of this asset. While we execute on the platform, we are consistently evaluating a constant pipeline of additional opportunities. We review hundreds of sites and most do not meet our standards. We are disciplined around 4 key elements; power control and durability, scalability in 250 to 500-megawatt phases, signed credit-backed contracts, we do not speculate. And fourth, capital efficiency. We turn sites away all the time. But when we do find one that meets these criteria, we move decisively. Importantly, we already control the sites necessary to deliver our targeted 250 to 500 megawatts of contracted capacity annually through the end of the decade. The runway is in place. Growth from here is execution. Finally, we are building the team to match the ambition of the platform. We recently added a senior data center construction lead for Meta and have strengthened origination, project management, commissioning and cybersecurity capabilities. This business is one in the trenches of engineering detail, construction discipline and operational rigor. We are staffed accordingly. So in summary, the strategy is clear. The sites are secured. The capital is in place. Customer demand is strong. The team is built. Now it is about disciplined delivery, turning contracted megawatts into energized capacity and durable recurring cash flow. With that, I'll turn it over to Nazar.

Thank you, Paul. Let me start with delivery and risk compression. WULF Den and CB1 were delivered in the third quarter and generated revenue throughout the fourth quarter. CB2A is operational and CB2B is expected to be fully online in March. By the end of the first quarter, all Core42 capacity will be energized and revenue producing. Following contract execution, Core42 requested incremental fit-out enhancements. We adjusted sequencing accordingly. The monthly recurring charge was revised, no penalties were triggered and revenue commencement remains aligned with the customer's deployment schedule. Turning to the Fluidstack buildings. CB3 is expected to deliver in mid-May. After signing, the tenant finalized certain design optimizations, which we incorporated without changing building footprint or lease economics. The associated revenue timing impact has been incorporated into the financial model. Importantly, CB4 and CB5 were designed collaboratively with the tenant from inception. These buildings reflect a fully standardized, repeatable design and represent the majority of contracted WULF compute capacity. Several structural improvements materially reduce execution risk. First, electrical redundancy has been optimized and standardized. Second, trade stacking and sequencing have been refined to minimize rework. Third, long lead equipment was procured after final design alignment. And fourth, mechanical and electrical systems now follow a repeatable installation model. Execution risk declines as design standardizes and CB4 and CV5 reflect a mature optimized build. Both buildings remain on schedule with targeted lease commencement dates of third quarter and fourth quarter of 2026, respectively. Through design optimization, we increased critical IT capacity from 162 megawatts to 168 megawatts per building without impacting the base construction budget. That incremental 12 megawatts across the campus is expected to generate approximately $200 million of additional lease revenue over the initial term. Finally, Abernathy, our joint venture remains aligned with its fourth quarter 2026 lease commencement and continues progressing under fixed EPC structure, which further limits construction cost variability. Execution requires managing scope, timing and cost in real time. We have incorporated adjustments transparently and remain focused on disciplined delivery. Large-scale AI infrastructure requires active management of scope, schedule and cost. We have incorporated refinements transparently, preserved economics, increased capacity and maintain budget integrity. Execution remains disciplined and on track. With that, I'll turn it over to Patrick.

Thank you, Nazar. The second half of 2025 was transformational for the company. We secured over $12.8 billion of HPC lease agreements, executed $6.5 billion of debt and equity-linked financing and materially strengthened our balance sheet liquidity while carefully managing and minimizing dilution. Let's begin at a high level before diving into the financial details. We are a business in transition and executing on rapid growth. The 2025 results still reflect a meaningful contribution from Bitcoin mining and its inherent volatility, including commodity pricing and complex network difficulty dynamics. Over time, that volatility will decline as long-term credit-enhanced HPC revenues become the dominant driver of results. Importantly, while mining introduces revenue volatility, its flexible load profile has been strategically valuable at Lake Mariner, supporting demand response participation and power cost management. Mining is not a long-term growth focus, but it has enabled the transition. The 2025 results of operations reflect that transition in motion and the balance sheet reflects that we have the capital structure to execute. In the fourth quarter of 2025, revenue was $35.8 million, down from $50.6 million in 3Q '25, primarily driven by lower Bitcoin production. Importantly, HPC lease revenue increased to $9.7 million in Q4, up 35% from $7.2 million in Q3. For the full year, revenue increased 20% to $168.5 million from $140.1 million in 2024, with digital asset revenue of $151.6 million and HPC lease revenue of $16.9 million. We commenced HPC leasing in July 2025 and have energized 18 megawatts of critical IT capacity as of year-end. As additional buildings come online, revenue mix will continue shifting towards stable contracted HPC revenue. Cost of revenue, exclusive of depreciation increased 10% from $17.1 million in Q3 to $18.9 million in Q4. Demand response proceeds recorded as a reduction in cost of revenue decreased [Technical Difficulty] million in Q3. For the full year, [Technical Difficulty] million in 2024, primarily due to higher realized power prices. Demand response proceeds also increased year-over-year from $8.6 million in 2024 to $17.7 million in 2025. Operating expenses increased as we scaled the platform to support HPC deployment. Quarter-over-quarter operating expenses rose to $8.8 million from $4.5 million. Full year operating expenses increased to $19.7 million in 2025 from $7.6 million in 2024, reflecting staffing and operational readiness. For context, TeraWulf finished 2024 with under 100 full-time employees and will exit 2026 with close to 300 full-time employees. Let me address the HPC leasing segment profitability as presented in Note 19 of our 10-K. The as-reported annual segment profit margin is approximately 42% versus our long-term guidance of approximately 85%. That difference is driven by 3 factors; first, $1.2 million of tenant fit-out revenue and associated costs during 2025. PFO carries a modest margin as provided for under the HPC leasing. Second, $4.1 million of development and pre-revenue operating costs; and third, partial period revenue contribution as buildings [ ramps ]. Adjusting for those factors yields approximately 77% segment profit margin in 2025, which is consistent with ramp expectations and converging towards our 85% steady-state margin guidance as utilization stabilizes. SG&A expense also increased as we scaled the platform to support HPC deployment. Quarter-over-quarter, SG&A expense rose to $66.6 million from $16.7 million. Full year SG&A expense for 2025 totaled $147.8 million from $70.6 million in 2024. After adjusting for stock-based compensation, SG&A increased from $39.7 million in 2024 to $94.5 million in 2025. This increase is primarily attributable to an incremental $47.5 million of new hires, strategic growth performance and milestone-based employee compensation in 2025, reflecting the notable scale of execution achieved during calendar 2025. Adjusting for this item results in total SG&A of approximately $47 million in 2025, in line with our prior guidance of $50 million to $55 million. Depreciation increased to $88.6 million in 2025 from $59.8 million in 2024, reflecting infrastructure placed into service and accelerated depreciation of $19.6 million associated with certain mining assets transitioning to HPC use. Interest expense in Q4 was $62.4 million compared to $9.8 million in Q3, and we recognized interest income of $31.5 million in Q4 compared to $4.1 million in Q3. Annual interest expense for 2025 and 2024 was $80.2 million and $19.8 million, and we recognized interest income of $39 million and $3.9 million, respectively. The increases in net interest expense were expected following our capital raises at TeraWulf and WULF Compute in the second half of 2025. Actual cash interest paid during Q4 and calendar year 2025 was $6.9 million and $13.9 million, respectively. Change in fair value of warrant and derivative liabilities in 2025 was a loss of $429.8 million, primarily related to the Google warrant. This is a noncash loss and therefore, does not affect our liquidity. Equity and net loss of investee net of tax for 2025 was $4.1 million, which represents TeraWulf's 50.1% share of the net loss of the Abernathy Joint Venture, which was formed in October 2025 and has not yet commenced operations. Our GAAP net loss in 2025 was $661.4 million compared to a net loss of $72.4 million in 2024, with the increase primarily driven by noncash fair value adjustments related to the Google warrant and noncash depreciation. Our non-GAAP adjusted EBITDA in 2025 was negative $23.1 million, down from positive $60.4 million in 2024. As a reminder, these results are inclusive of significant increases in SG&A and operating expenses over the past 12 months as we invest heavily in our HPC business. Turning to the balance sheet and liquidity. As of December 31, 2025, cash and restricted cash totaled $3.7 billion. Total assets amounted to $6.6 billion, with total liabilities of $6.4 billion. Regarding liquidity, as detailed in our fiscal year-end 2025 investor presentation on the slide titled Capital Structure. As of January 31, 2026, the HoldCo parent entity had approximately $500 million of available cash or approximately $300 million pro forma for the Kentucky acquisition announced on February 2. Regarding project level capital positions and construction progress, both WULF compute and Abernathy are fully funded through substantial completion with long-term fixed rate financing, eliminating construction funding uncertainty and reducing reliance on near-term capital markets access. Importantly, we do not anticipate the need for additional equity to fund our currently contracted development. As of January 31, 2026, WULF Compute had approximately $3 billion of gross cash or $2.6 billion net of debt service reserve and interest-earning construction accounts, with $850 million of CapEx spend complete and $2.38 billion remaining. That leaves approximately $200 million of cash cushion, which is incremental to the substantial contingency embedded in the financing structure. As Nazar noted, schedule adjustments resulted in approximately $16 million less projected revenue in years 2025 through 2026. However, design optimization has increased capacity from 162 to 168 critical megawatts across CV4 and CV5, generating approximately $200 million of incremental revenue over the initial lease term. The net effect improves projected cash flows and reduces expected debt and maturity by approximately $45 million versus prior projections. Finally, with regard to the Abernathy JV, as of January 31, 2026, the JV had approximately $1.5 billion of gross cash or $1.2 billion net of debt service reserve, interest during construction, letter of credit and HoldCo LockBox accounts, with $268 million of CapEx spend complete and $1.1 billion remaining. That leaves approximately $70 million of cash cushion at Flash Compute with a further $100 million liquidity reserve at the parent JV, supported by a $1.35 billion lump sum EPC contract with [indiscernible]. With respect to Kentucky, we have proposals in hand for secured loan facilities to fund pre-lease development to preserve HoldCo parent liquidity. Demand for near-term power remains strong, and we are targeting 480 megawatts online in the second half of 2027. We do not build on speculation. In summary, 2025 reflects a business transitioning from volatile Bitcoin mining revenue to stable contracted HPC revenue. Mining has strategically supported that transition. Contracted HPC revenue is ramping, liquidity and contingency are strong. With that, operator, we are ready to take questions.

[Operator Instructions] Our first question comes from Mike Grondahl with Northland Securities.

First, I just wanted to start with Kentucky. That site sounds like the reception has been strong. Could you give us a few more details on the site and what an ideal customer or lease would look like there?

Mike, this is Paul Prager. It's a fantastic site. This was the site of a former smelter. It's at a transmission super highway. Multiple utilities can service the property. What was most compelling about it, was its central location and the immediate availability of power in scale. Demand for the site is extremely strong. Our data room is open. Every major hyperscaler and several large AI compute platforms are doing diligence. The conversations to date have been substantive with some written term sheets already coming over the desk. Earlier this week, I was down in Kentucky. I met with Governor, Beshear and state leadership. The alignment at the state and local level is clear, very constructive, very, very, very pro-business. The importance of this project for the local community, particularly the public schools, which Kentuckians are super proud of is massive. We held a community info session 2 nights ago. We had a job fair yesterday. We filled the auditorium and then some. We're extremely excited and confident in the long-term value of the asset. As Patrick has said from day 1, we're all focused on the best financial credits to be our long-term customers. I think we've operated that way in the past, and that's the message going forward. I think you'll see a world-class credit as our next customer for what we're hoping to be a 10- to 15-year deal. I think we'll see that deal happen pretty soon. I don't want to give you a drop dead date, but we're in very, very active and substantive discussions.

Great. And then secondly, the Maryland site, seems like a lot of potential up to 1-plus gigawatts, but a little bit more complex. And kind of playing into what you guys have talked about, bring your own power, how does that play into some of TeraWulf's strengths?

Sure. Just to be clear, Chesapeake Data, it's about the power and load differentiation. It's a gig site with certainly a gig data center load capability, 500 megawatts of battery storage capability. It's a former coal generation campus. It's in the Northern Virginia corridor, which means prices are exceedingly competitive. It's designed to be a net contributor to the Maryland grid. It's very well supported by Governor Moore and MDE. Again, both Maryland and Kentucky, by the way, have very sophisticated brownfield programs, which make it really easy for a guy like us who's been around the block and owned and operated coal-fired power plants shutting down, mitigated them, did everything the right way. These 2 states have very, very progressive programs on how we do that at commercial feasibility. Listen, the market is moving to bring your own generation. We said that a year ago. In December, Alphabet bought Intersect for almost $5 billion. In January, Microsoft raised dedicated generation as part of their 5-point infrastructure strategy. President Trump in January floated the notion that PJM emergency auctions needed to incentivize new generation. New generation projects would go to the top of the queue for interconnect. And then just the other night, in the State of the Union, the President stated data centers need to build and fund their own generation. So that's where the world is going. We have a real and growing power shortfall. Morgan Stanley says potentially 47 gigawatts, 2025 to '28. The hyperscalers are openly stating that power is the binding constraint. Look at anything recent public commentary by Colette Kress, NVIDIA's CFO, Sundar, Alphabet's CEO; certainly Jens Huang, NVIDIA's CEO. I mean it's all about we need power. So delivering generation alongside that load solves the problem. We could bring incremental megawatts to the grid or the system, dispatchable generation using CCGTs, not just bridging power. And we have a history of partnering with grid operators to solve reliability and adequacy challenges. What's our core competency? We've been talking about this. This is the only team out there. For 25 years, we have been developing, building, renovating, rescuing generation, 6 gigs of power generation experience on this team together on this team, it's been over 25 years. We have deep expertise in siting, interconnection, generation development. And that's why we could go and take on a project like Morgantown and have the support that we can from both the local and state communities as we pursue this. We're really excited about Morgantown. It's a big job, but it fits into our schedule. And again, we've told the world we're 250 to 500 incremental megawatts of data center load every year, and this fits right in.

Our next question comes from Tim Horan with Oppenheimer.

Do you think the pricing and terms and conditions in Kentucky can be materially better than what you've done in the past? And the construction schedule seems pretty ambitious. Do you have the labor and all the equipment you think you'll need and, I guess, the permits to get it done?

So I think I'll go first and maybe Nazar, you can go second. In terms of the labor, yes, Kentucky is a fantastic -- it's just a fantastic place. You have not only the construction expertise and the trades expertise, but you got people that really want to work. We brought on for that job Fluor, which I consider to be a world-class contract party. We've dealt with them in the power space for a long time. They have relationships along in our C-suite for many, many years at every level. We are already ahead of the curve in sort of procurement. We have a proven design that our hyperscaler customers really like. And we think because it's immediate available power, we don't think -- we know because we've got this very robust conversation going on right now with folks that want to come in and be our customers there for competitive pricing. Naz?

Yes. And just to add to what Paul said. As Paul said, we brought in a Fluor on the EPC side. So we're already hitting the ground running with respect to the overall development of the project. And so the time lines that you see for the second half of '27 are reflective of ongoing and meaningful discussions already with the EPC. So that's -- so we feel pretty good about the overall time line. The other big component is gathering the labor that's going to support the project as well. And so there have been efforts already underway for both the mechanical, electrical and civil scopes to get the requisite labor to support the project as well. So that date is informed by quite a bit of discussion that we've had with Fluor, who's our EPC as well as the work that we've done on site since the acquisition. In terms of just the overall economics, I think we've said these on prior calls, we really think about these projects on an unlevered yield basis. And so if you look at where we've been historically, we think we'll be in that

Our next question comes from Chris Brendler with Rosenblatt Securities.

Congratulations on the progress here. I wanted to ask on couple of -- on the power side. First, I noticed that the PUE across all these sites is right in line with the initial deals at 1.25. And you mentioned in the slides that that's best-in-class. And my understanding was there were certain aspects of like Mariner and Cayuga that drove that 1.25, but maybe I'm mistaken, it seems like it's standard for TeraWulf to operate at that incredible efficiency. Can you just give us a little color there on why you're able to sort of runcurles around your competitors when it comes from a PUE standpoint?

Sure. Chris, it's Nazar here. So there's a couple of factors in that. As you noted, one is just the geographic location. And again, as we are more in the northern half of the country versus southern half of the country, there are benefits that we have from an ambient conditions perspective with respect to the design and being able to meet that peak PUE. You'll see the Abernathy site is at 1.4 PUE, again, which is reflective of just the geographic location. In addition to that, we have invested heavily kind of on the cooling side as well. And so we're giving ourselves extra room on the design that we have on cooling as well to maintain that lower PUE. So in general, as we think about where we are for generally kind of in the northern half of the country where we have these off seasons during kind of the winter and the spring and where the summer isn't sustained heat, we think we can kind of maintain that 1.25 PUE.

Okay. Was there also a redundancy aspect to it? Are you still not using big diesel generators in these sites?

That's correct. And again, that gets back to these brownfield sites. So typically, you're seeing us play at brownfield industrial sites. And the way to think about it is when the smelter was there, there was a significant investment to design and build a smelter at that site. The last thing that Century wanted was a single point of failure on power coming into the site, no different than a data center, right? So there's 5 different lines coming into that site, which provides a considerable amount of kind of redundancy. So when we look at sites like that, we see that there are multiple independent pathways for the delivery of power, which obviate the need for on-site kind of backup generation. So again, Morgantown, similar. It used to be a former coal-fired power plant, that 1.5 gigawatt coal-fired power plant did not want to have a single point of failure and getting power out. We're utilizing that same system now to kind of bring power back in. So the big benefit with these industrial -- former industrial brownfield sites is that usually, they have that built-in redundancy that data centers want as well.

I just wanted to thank for that question regarding PUE because we put a page in the deck called critical IT capacity, the metric that matters. And what we're going to be trying to do and really sort of ensure the Street and our retail shareholders understand gross megawatts measure scale, but it's critical IT megawatts that measure monetized execution. And we think of TeraWulf as an execution story. So we're really going to be reporting more in the context of critical IT as opposed to just gross megawatt capacity. We think it's far...

Great. One more quick question is the 0.5 gig of battery power sort of caught my eye. Can you just give us a little color on why and what that means?

So as we're adding these large loads and if you see in the statements that we've made, we want the site to be overall a net supplier of energy back to the grid and to the state. So having that battery storage allows the load at the site to operate in a way [Audio Gap] really impacting peak demand. And so it's kind of a critical peak demand shaver, which we think, again, provides -- makes the loads that are there assets back to the grid rather than burn it. So we think the right composition is about 0.5 megawatt of storage per megawatt of load. And so that's why you see in each of the phases at Morgantown for every megawatt of load, there's about 0.5 megawatt of battery storage.

That's great. Congrats on 2025 transformational year, looking forward to 2026.

Our next question comes from Nick Giles with B. Riley.

Guys, I want to congratulate you for the progress across all fronts. Maybe just following up on that last one, you mentioned the battery storage, and there just appears to be some different moving parts at Chesapeake. So can you just give us a sense for how CapEx could differ from Mariner and what you're doing to really derisk that development?

Sure. So when we think about -- as we think about the composition of Morgantown, as you noted, there's a few different legs here versus what we're doing at Lake Mariner or other sites. On the data center side, we're in that $8 million to $10 million per megawatt range for CapEx. And so that's what we've done at Lake Mariner, at Abernathy. And as we look to contract Kentucky, we're in that same range. In Morgantown, now, we're adding 2 incremental legs. One is the power generation side and the second is the battery storage. On the power gen side, we're in that -- we're going to be somewhere in the $2 million to $3 million per megawatt range for the fully delivered power plant. Part of that will be time. Part of that will be the type of turbines that we are deploying, and we're working on a number of different alternatives for that site as we speak. But that will be around $2 million to $3 million per megawatt for that capacity. And there's about another million or so kind of dollars per megawatt on the critical IT load. So kind of the battery storage is usually kind of priced in a megawatt hour basis. But when we translate it back to just kind of the overall load, that's around another $1 million. And so when we think about what we're offering back to our customer, it's the data center that they're already paying for in other deals that we have, that $8 million to $10 million per megawatt range. In addition to that, now it's the components on the generation side, the $2 million to $3 million per megawatt on the dispatchable gas-fired generation and then another $1 million or so on the battery storage. So all in around $13 million to $14 million per megawatt on a fully loaded basis. What that does kind of embedded within that, we will be seeking to kind of charge that full cost back in the capacity payment back to the underlying customer. So they'll effectively now be long the value of the generation as well as long the capacity in the data center. With the grid connectivity, we will have now kind of the ability to both bring the power in from the grid as well as generate more than enough power to offset that load kind of going out. And so on a net basis, we think over time, the net cost of power that the tenant will realize will be meaningfully lower than just a grid solution only. So kind of on the ins and outs, again, there'll be kind of paying a capacity payment for all of the CapEx, both on the gen side as well as the data center. But they'll be belong kind of the value of that gen -- the value of that energy, and that will be offset by whatever they pay for the power coming in. So net-net-net, we think it's a very strong position. It gives the tenant, a, a quicker path to scale up in scale, that gigawatt is a large amount. And b, we think over time, their net cost of power will be meaningfully lower than a solution that's relying on the grid only.

Nazar, I really appreciate all that detail. I'm sure others will have follow-ups. I just wanted to squeeze one in on the regulatory side, I think you still need approvals from FERC at Morgantown. Can you just walk us through what the timing looks like there and how we should think about what you ultimately need to get across the finish line from a third-party perspective?

Yes. It's pretty pro forma approval process that we've done countless times. It happens anytime you transfer an existing power facility to another party. We're certainly -- they tend to look for things like are you monopoly in the area, stuff like that. We are not. We consider this to be just pretty routine. We would expect FERC approval within 3 to 6 months.

Our next question is from Stephen Glagola with KBW.

Could you update us on any remaining zoning requirements or state and local approvals needed to move forward with the Hawesville data center campus? That's one. And then two, separately, while Cayuga has already received zoning approval, are there any additional permitting or regulatory steps still outstanding for that site?

We'll go backwards. I'll start with Cayuga. And in Cayuga, we had our first informal session with the planning Board a couple of nights ago. It went very well. They were engaged. They asked good questions. And so that process is one where we go ahead and finalize our application. That will take another month or so. They then meet on it, they review it. We come to an agreement together on what that permit should look like. They'll be solving for certain conditions like are you drawing water from the lake? What will noise levels be in the midst of operation? What are you doing for the site in terms of beautification, things like that. These are all reasonable things. It's what we do. It's what any company in redeveloping a former power plant or industrial complex does. The Cayuga process, as you know, first was -- had to go through zoning board of approval to ensure that it was consistent with the definition required to achieve a permit. It did win the day on that. And so we're just ordinary course routine working together with the planning board of the town to move forward. With respect to Kentucky, Naz?

Yes. So on Kentucky, Stephen, from a permit perspective, we have to obtain the requisite building permits. That being said, we had a town hall this week in Hawesville. We had a workforce session for potential employees. And so the entire Judge Executive, Economic Development Director in Hawesville are all kind of fully on board and very eager to kind of get us going. As Paul mentioned earlier, it's an extremely supportive environment. And so while we don't have the permits in hand, everyone is fully aware of what we're doing. We briefed them on both the scope, size and scale of the buildings that we're bringing. Importantly, as a part of what we're doing at Hawesville, we're also decommissioning and taking down the old aluminum smelter. So there's a big cleanup that's happening at the site as well, which the town is very eager to have happened. So we got to do all that, but that's, I think, going to come in time. We're expecting -- as soon as we can get this lease signed up, we'll be in a position to kind of submit all those things. We have previewed a number of those things, and we're hopeful that it should be a pretty smooth process to kind of get approvals around that.

Just 2 more things. One is with respect to both of these projects, there's not just one permit you get. There's a principal notion of a permit for a facility. But all along the way, you have -- whether it's a specific demolition permit or a building permit for a particular structure, you need to get local permit. The second thing I just wanted to mention about Cayuga, which is kind of interesting, as the state has become really a popular place for people, and they look forward to doing more data centers there, they are starting to come with this notion of what about power. The beautiful thing about the Cayuga site is it was a former power site. It can be again. We have the ability both in terms of the landlord's huge site, which is 400 acres. We have the ability to sort of bring in our own power generation if that was ever something important to state or local constituents. So Cayuga is, I think, really a much better site than just any other one in terms of that part of the world because of its ability to house a power plant on it, if it's needed.

Our next question is from Darren Aftahi with ROTH.

First one, if I may. Could you kind of characterize the -- maybe competitive process at Hawesville, maybe comparing that to like Mariner? And are we talking about one entity taking the 384, is it going to be multiple entities? And then I've got a follow-up.

I'll start maybe just by giving you -- in the environment that we were contracting for Lake Mariner, I think we were very confident we had a really special site. But I think the hyperscalers were on the growth curve in terms of education. They were on the growth curve in terms of figuring out design. When we started Lake Mariner, I think people were not as rock solid in their design notions or in terms of how they would fill out their customers' ledger. So I think we're in a very different environment now. We're in an environment where the hyperscalers are -- I mean, this is [Audio Gap] I've been in over the course of the last 45 years. I mean you've got Meta is very aggressive. Google's got a great program. Amazon's got a great program. Microsoft come back into the market. They're extremely competitive. You've got some of the neos that are really seeking larger and larger facilities. So we're in a much more competitive environment where the customers actually have much more definition to what it is they want. The second thing is when we started out with Lake Mariner, we had already built some buildings a little bit. And so we had to sort of work with our customers, for instance, in WULF Den and CB1 and 2 on sort of figuring out the design elements that they wanted even in CB3. Whereas 4 and 5, we built those buildings from the ground up with the customer, which made the whole procurement and build process that much more efficient. So I would tell you, we have a much more committed and sophisticated customer right now who knows the design needs that he or she wants, and we're in a much more competitive environment. So we're pretty excited about -- that was -- what the beautiful thing about Kentucky is its immediate availability has just enabled a very robust dialogue for us in terms of filling out our customers. But Naz, do you want to add something?

Yes. The only thing to add, Darren, is we're targeting 1, maybe 2 customers for the entire site.

That's helpful. And then just as a follow-up. I mean, so you've given -- you've kind of raised your bogey and given this 250 to 500 range. I guess what are the 1 or 2 deterministic factors that kind of drive that range? And given your background in power as a team, I mean, is there any reason we could think maybe there's upside to that range? I'm just trying to get an understanding of what that context really means.

I can start here, and then Paul, you can jump in. The 250 to 500 is a very kind of calibrated range that we're giving you. It factors in the operational and just deployment capabilities. Again, this is getting hundreds of people on site across multiple trades. It's a procurement process around equipment and ensuring that we're not the last buyer, but we have quite a bit of room between what we need and where the market has availability. And then from a financing perspective, it's what the company can bear from an accretive perspective. So when we talk about 250 to 500 megawatts per year, that's $2.5 billion to $5 billion of incremental capital per year that we are guiding the market that we're going to spend every year for the next few years. And so when we talk about the 250 to 500 really is a calibrated guidance around all of the various facets that are required to properly execute and deliver upon capacity. So that's where we are. That's what we see is available. 1.5 years or so ago, we were guiding at 100 to 150. As we've been able to now deploy capacity and understand the needs of customers, we've upped that guidance to 250 to 500. We remain very confident that every year for the next few years, we will continue to sign up another 250 to 500 megawatts of critical IT load with customers, deliver that 12 to 18 months hence and do that year-over-year and continue to kind of grow shareholder value as we're doing that.

Yes. I would want to add a few things. Number one is we selected Fluor to be our contractor in Kentucky. Why? Because we think they're the most skilled contractors in the country. They're particularly good on the front-end projects so that the execution side goes flawlessly. I think as we move forward, the notion of the selection of Fluor was scalable growth so that we could work with them on additional projects on a national level. The second thing is we're all about execution. Again, whether it's on the development side or the execution side, we could talk as much about our pipeline as you want. We could talk as much about all the projects that we're reviewing before we decide to make a move. But at the end of the day, if we don't deliver for our customers, we are out of business and we have failed our investors. So we need to be conservative here because we're still on the -- we're still a nascent business. I mean we've seen changes in the design of our facilities just between CB2A, B, 3, then 4 and 5. And so I think as we're learning and growing in partnership with our customers and now our leading contractor in Kentucky, we will continue to enhance our execution capabilities -- and if there is an opportunity to grow beyond what we've said is 250 to 500 incremental critical IT load, then we will. But for right now, we have to keep our eye on the ball. The table is full of lots of cookies and cakes and candies, but we have to stay focused on the meat and potatoes and deliver for our customers.

Our next question comes from Brett Knoblauch with Cantor Fitzgerald.

Paul, I guess you have multiple attractive sites that you could theoretically kind of go and lease out now. I guess in talking to prospective customers, is there a reason why they would want maybe the Kentucky site over Lake Cayuga or maybe the mega campus that you're building in Maryland? And has in your mind, what maybe site is next up for grabs changed? Has kind of Kentucky jumped to the top of the list?

Listen, I -- so first off, the answer is the demand is so significant. I think that a party would be happy to take everything off the table at any one time. But it's about time to power. And that's why Kentucky has become so important to the customers that we're in discussion with. The ability to have that kind of scale within this short period of time or [ albeit ] promptly, if you will, just makes it one of the most exciting sites in the country. The one thing that we've been pushing, Brett, is we like regional diversity. We think hyperscaler customers are getting focused on that, too. We think they've seen now, they've experienced what happens now first in Ohio and then now down in ERCOT. When you get everybody all in one place, it's a question of security, but it's also a question of what can the grid really handle. And so I think having regional diversity is something that our customers find compelling. And that's a good reason for them to really focus on Kentucky, that and the immediacy of its power.

Awesome. And then I think in the prepared remarks, you said that Kentucky could potentially expand beyond the 480. I guess to what extent have you guys looked into that? And how much do you think it could expand beyond 480?

I think, listen, we've talked to our power suppliers there. We understand the grid there. I think that -- and again, I was just with the governor a couple of days ago, and he's really terrific. He runs DGA. He is very commercial. He's very pro-business for the state. I think that we will have opportunities to expand our footprint both in the generation side and on the customer side in Kentucky. But again, I have to stay focused, right? My job is execution. I've got to deliver these facilities to our customers, and we're doing that at Lake Mariner. And Kentucky is going to be a very prompt bid. We've already issued a limited notice to proceed to floor just because our customers really want to get onto that property. So we're doing everything we can to facilitate that. Just going to really focus on execute.

Our next question comes from Michael Donovan with Compass Point.

To follow up on what you're talking about, Paul, on sizing and design plans. For Maryland and Kentucky phase build-outs, what is the target critical IT megawatt per building or hall you're thinking about today? Should we think about repeatable modules similar to Fluidstack? And what drives that sizing decision?

Yes. This is Nazar here. So in the Fluidstack context, that 168 megawatts of critical IT load is the base design that we worked closely with them on developing. You've seen that number pop up subsequently with other of our peers as well. But in that context, that's kind of the base design. That puts you a little over kind of 200 megawatts of gross capacity. And so in general, as we're having discussions with various customers, we typically look at that 200-megawatt gross, 160-megawatt net as kind of a building block that we're building off of. And so the design that we're working on with Fluor really kind of incorporate that, again, roughly 200 megawatts plus or minus gross, 160 megawatts plus or minus net critical IT megawatts as the base building block from which we're kind of deploying that. And so when we talked about Kentucky, for example, in that 380 of net, that's a couple of those buildings would kind of consume that capacity.

Our next question is from John Todaro with Needham & Company.

First one is more high-level political regulatory. It sounds like really good conversations with the governors in Kentucky and Maryland. Just wondering though more at a broader level, how you are viewing some of the pushback at the state level to data center builds. Just any commentary there, whether sort of the media articles might be overblown or if there is some risk there.

So it all requires, I would say, thoughtful and careful engagement. How you bring your load on is critical to how you're perceived and what impacts you have. And so if you have been listening to us for the last few years when we talk about Bitcoin mining, we've said from the beginning, there's a way to do Bitcoin mining that's accretive and an asset back to the grid, and there's a way to do it where you're not. And so we have been very engaging with. I mean, for example, in Kentucky, we spent a tremendous amount of time with the energy supplier there, Big Rivers and have developed a very close and strong working relationship with them, where we are kind of aware of the challenges they have on committing to supporting a large load. And if it's there, it's great. And when it's gone, it's not so great. That's a, and so kind of ensuring that our interests are aligned with them and they have clear visibility on where we are. And then b, just in terms of the overall load profile and when you're consuming power and what happens at those kind of peak demand hours. And so we've been very, again, thoughtful in thinking through how does our load and where we're locating these loads tie back to what's happening in the grid around it and how do we ensure that, again, that our loads can be overall assets and kind of beneficial back to the grid and to the local communities versus just kind of coming in and being burdens. And so I think the articles, the news is news and kind of it comes out, how it comes out. But we pride ourselves in trying to be very thoughtful around the issues that we think are pertinent and properly addressing them. And so hopefully, over time, you'll see even in Kentucky, based upon how we're structuring things with the local utility down there, that it hopefully becomes a model for how things should be done an example of how data centers should be integrated back to grids.

Great. And then second one is just on kind of where we are in the headcount growth for Kentucky and Maryland and just, I guess, how you frame up some of the G&A guardrails around there.

So we are in the early stages on both. We have kind of ramped up the Kentucky team to half a dozen or so folks over time, including the on-site personnel, that's going to be over 100 people for Kentucky by itself. Each of our sites, we are targeting somewhere in that 100 to 120 people range for fully loaded staffing once the site is fully operational. And we're probably a couple of people in Maryland right now. As was noted earlier, we're pending kind of FERC approval to take over the site. There's existing generation at the site, and so we're ramping that team up to kind of support the operations as well. So I'd say we're in a couple of dozen people between the 2 sites now, but that's quickly increasing. And again, we should be hitting towards the end of the year, early next year, we should be hitting pretty sizable numbers in Kentucky, and we'll kind of be in that 100 people range at Kentucky by this time next year, I would guess.

We've also, of course, added at the corporate level so that we can manage the much larger portfolio and stay on top of everything from procurement. And so it's legal, it's accounting, it's IT. It's everything that you need at the corporate level to manage projects of this scale.

Our final question is from Martin Toner with ATB Cormark.

When do you think Phase 1 of Morgantown might be able to be turned on?

We're working through that as we speak. So at Morgantown, in addition to the 3 legs we mentioned earlier, just kind of run the load, the data center, the gas gen and the battery storage. There's also a remediation that goes along with that. We were with the MDE just this afternoon and kind of scoping that out. And so once we get definition around the timing and scope of that remediation plan, that will then kind of feed into just the timing. If you look at what we said kind of in the deck, we've kind of positioned this as kind of end of '28, kind of in '29 and beyond. So generally, that's where we are. But over the next, I'd say, couple of quarters here, we'll have greater definition to provide around the specific timing of Morgantown.

Coming at it from 10,000 feet, State of Maryland had some challenges because they've shut down a lot of their great generation. They weren't really as pro generation as -- or as prescient to what would happen as a lot of other states, which have been very, very supportive like Pennsylvania next door. So the governor has really changed policy. We've received written commitments for expedited permitting for our site. So I don't think this is going to be business as usual. I think they're really keen to have us come there, create jobs, both at the county level and the state level. The reception has been amazing, but they have literally given us sort of an office to work with to expedite all sorts of permitting from the repowering to the remediation.