Good evening and welcome to Stronghold Digital Mining Conference Call for the Fourth Quarter and Full Year ended December 31, 2022. My name is Justin and I will be your operator this morning.

Before this call, Stronghold issued its results for the fourth quarter and full year 2022 in a press release, which is available in the Investors section of the company’s website at www.strongholddigitalmining.com. You can find a link to the Investors section at the top of the homepage.

Joining us on today’s call are Stronghold’s Co-Chair and CEO, Greg Beard and CFO, Matt Smith. Following their remarks, we will open the call for questions. Before we begin, Alex Kovtun from Gateway Group will make a introductory statement. Mr. Kovtun, please proceed..

Great. Thank you, operator. Good morning, everyone and welcome. Today’s slide presentation, along with our earnings release and financial disclosures were posted to our website earlier today and can be accessed on our website at www.strongholddigitalmining.com.

Some statements we are making today maybe considered forward-looking statements under securities law and involve a number of risks and uncertainties.

As a result, we caution you that there are number of factors, many of which are beyond our control, which could cause actual results and events to differ materially, from those described in the forward-looking statements.

For more detailed risks, uncertainties and assumptions relating to our forward-looking statements please see the disclosures in our earnings release and public filings made with the Securities and Exchange Commission.

We disclaim any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law.

We will also discuss non-GAAP financial metrics and encourage you to read our disclosures and the reconciliation tables to applicable GAAP measures in our earnings release carefully as you consider these metrics.

We expect to file our annual report on Form 10-K by the end of the week with the Securities and Exchange Commission, which sets forth detailed disclosures and descriptions of our business as well as uncertainties and other variable circumstances, including, but not limited to, risks and uncertainties identified under the caption Risk Factors in our previously filed quarterly reports on Form 10-Q filed on May 16, 2022, August 18, 2022 and November 10, 2022, and our to-be-filed annual report on Form 10-K.

You may access Stronghold’s Securities and Exchange Commission filings for free by visiting the SEC website at www.sec.gov or Stronghold’s Investor Relations website at ir.strongholddigitalmining.com.

I would like to remind everyone that this call is being recorded and will be made available for replay via the link available in the Investor Relations section of Stronghold’s website. Now, I would like to turn the call over to Stronghold’s Co-Chairman and CEO, Greg Beard.

Greg?.

Thank you, Alex. Good morning, everyone and thank you for joining us on our fourth quarter and full year 2022 earnings call. For today’s call, we are going to reference an associated slide presentation that is available through the webcast and on the IR portion of our corporate website.

I want to start by thanking our employees for their ongoing hard work and dedication to our mission during a difficult time in our markets.

While 2022 was a challenging year for our business and most public Bitcoin mining companies, we believe that we undertook several important steps to survive the downturn in the crypto markets and best position Stronghold for long-term success.

We responded proactively to challenges in both the crypto and power markets while prioritizing liquidity to endure.

Before turning the call over to our CFO, Matt Smith, for a detailed review of our financial results, I would like to touch on some of these highlights from our business transformation over the last year and why we remain excited about the year ahead. Let’s start on Slide 3.

As a reminder to everyone on the call, Stronghold owns and operates two waste coal reclamation facilities in Pennsylvania, Scrubgrass and Panther Creek. Over the course of 2022, we have moved over 1 million tons of coal refuse from the environment and mined over 2,000 Bitcoin.

We are currently at 2.6 exahash of hash rate capacity and have the ability to get to 4 exahash with the already built and ready-to-use slots at our data centers. Moving to Slide 4.

Back in August on our second quarter 2022 earnings call, we outlined the strategy to rapidly delever our balance sheet, enhance liquidity, improve efficiency and opportunistically build our mining fleet to better position Stronghold for success and ultimately maximize shareholder value.

While there is still work to be done, we have made considerable progress on all fronts and believe that we have a robust platform to grow value for shareholders. First, the vertically integrated business model is working.

We are constantly looking at good prices and Bitcoin mining economics and choosing whether to self-power our Bitcoin money operations, sell power to the grid or import power from the grid to power miners when grid pricing is lower than our variable cost of power.

As I will further elaborate, just in the last few months, we have realized significant benefits from both selling power to the grid and buying power from the grid. Moving on to our balance sheet, we recently completed a 7-month process of restructuring virtually every piece of material debt on our balance sheet.

Since June of 2022, we have reduced our debt by nearly 60% to $60 million, which we believe is a manageable level in the context of our cash flow expectations. We also have no mandatory amortization until July 2024, which has enhanced near-term liquidity and flexibility.

With the restrictions behind us, we are now laser focused on scaling and optimizing our Bitcoin mining operations at each of our data centers. We are raising our hash rate guidance back to 4 exahash and believe that we will be there by the end of the year, if not sooner.

Through purchasing miners in a distressed oversupplied market and through entering into hosting agreements, such as the previously executed foundry deal, we think we can grow hash rate in a highly capital-efficient manner. Finally, on the cost side, we have also made progress in materially reducing expenses across our business.

We have done this through a combination of completing several one-time projects and rightsizing our business through in-sourcing certain functions and improving overall efficiency to adjust to the current market environment.

During the fourth quarter of 2022, we began to see the benefits of these initiatives in our financials as our cash G&A expense is now trending below $20 million on a run-rate basis. Last quarter, we successfully completed planned outages at both our Scrubgrass and Panther Creek plants, which represented the last of the major planned investment cycle.

We expect to see more consistent and reliable power generation moving forward at both facilities and have been pleased with the post-outage performance so far.

We began to realize the benefits of the investments that were made during the fourth quarter and continue to believe that we will achieve an estimated net cost of power of $45 to $50 per megawatt hour in the first quarter of 2023 based on our results and performance to-date.

We have also been able to generate value from selling beneficial use ash, a byproduct of our cold refuse to energy process to offset expenses. In 2022, we realized a benefit of approximately $300,000, of which $200,000 came in the fourth quarter from a combination of incremental revenue and avoided disposal costs via sales of the beneficial use ash.

Ash is an ancillary business revenue stream that we expect to grow further and realize a benefit of at least $1 million during 2023. Moving to Slide 5. As I mentioned, we believe that the vertically integrated model is working and continues to prove its value.

The optionality to sell power to the grid provides a natural hedge for Bitcoin mining economics, which we saw over the summer and during the fourth quarter.

Additionally, our model provides the ability to sell to the grid when power prices spike and lower plant output to import from the grid when power prices are below our variable cost of generating power. We have realized benefits doing both in just the last few months.

During the fourth quarter, as Bitcoin prices continue to slump, we showcased the benefits of owning our own power plants and how our power market optionality provides us with strategic advantages over our peers.

During the quarter, we experienced two extremes, record high PJM power prices in December and the record low Bitcoin hash price in November and we are able to flexibly shift between selling power to the grid and using our self-generated power to mine Bitcoin.

Between December 23 and December 25, Winter Storm Elliott dictated that PJM declare a state of emergency. On the morning of the 23rd, we proactively shutdown our Bitcoin mining operations and send power to an extremely supply-constrained grid for the next several days, helping to balance the grid and benefiting consumers.

During this period, we realized grid prices in excess of $1,000 per megawatt hour, more than 10x what we would have made if we converted that power into Bitcoin, because we were able to deliver power when other generators could not.

More recently, we have experienced grid prices below $20 per megawatt hour and even negative at times in March and has lowered plant output to realize savings versus our available cost to generate power.

The chart on the right of the slide highlights how we can adjust our operations depending on power prices and hash price to optimize revenues with our vertically integrated model. Let’s move to the next slide.

As I mentioned earlier, we spent the last 7 months taking our debt from nearly $150 million to $60 million through a series of transactions with our lenders and debt holders.

First, in August, we completed the extinguishment of approximately $67 million in debt associated with our NYDIG equipment financing via a return of approximately 26,000 Bitcoin miners. Also in August, we eliminated about $11 million of convertible notes by restriking approximately 6 million warrants.

In October, we converted our White Hawk equipment financing with a 13-month tenor into a first lien note with a 36-month term and upsized the financing by $23 million. This February, we completed the exchange transaction with our convertible note holders to convert about $80 million of debt and accrued interest into convertible preferred stock.

Finally, also in February, we amended our White Hawk note postponing mandatory amortization until July 2024 and significantly loosening the financial covenants for 2023 and 2024 to strengthen the company’s ability to withstand industry pressure through the happening.

As a result of these transactions, we have now successfully restructured nearly our entire balance sheet to make Stronghold more resilient and provide its platform to focus on accretive opportunities. Moving to Slide 7.

Our enhanced liquidity position and improved cost structure gives us the flexibility to manage through this down-cycle and be optimistic by discipline in growing our minor fleet without additional leverage. Today, Stronghold’s Bitcoin mining fleet totals almost 30,000 miners with hash rate capacity exceeding 2.6 exahash per second.

4,500 of these miners associated with a definitive hosting agreement we signed with foundry in November with total hash capacity of approximately 420 petahash per second. Since then, we have expanded our partnership and signed a 2-year hosting agreement whereby foundry will fully participate in our vertically integrated business model.

While hosting is not our core focus, this unique agreement is highly beneficial for Stronghold and demonstrates our ability to creatively increase hash rate without significant capital investment. The hosting agreement allows us to quickly plug miners into our Panther Creek data center with no material CapEx.

This hosting deal and potentially other similar hosting deals offer us a natural pathway to fill a small portion of our open slots, while they continue to thoughtfully pursue purchasing wholly owned miners. Finally, an update on MinerVa.

We previously announced they should expect no additional deliveries from MinerVa because of the uncertainty at the time. However, MinerVa supplies to the upside and we recently announced that they have now fulfilled approximately 85% of our initial order from 2021, leaving only 230 petahash per second remaining to be delivered.

And after a significant effort by our operations and engineering teams, we believe that miners received from MinerVa are now performing largely in line with manufacturer expectations. With that, I’d like to pass it over to Matt Smith for a financial update..

record high PJM power prices in December and record low Bitcoin hash price in November. Revenue for the fourth quarter was $23 million, a 38% increase compared to $17 million in the same quarter a year ago. During the fourth quarter of 2022, our Energy segment had approximately $15 million of revenue.

We also mined almost 450 Bitcoin with total mining segment revenue of approximately $8 million. For the full year, revenue was $106 million, an increase of well over 200% compared to $31 million in the prior year.

During the fourth quarter, we began to realize the benefits of the investments and planned maintenance events that were made in our Scrubgrass and Panther Creek plants to improve plant efficiency and reliability.

This was especially true and on display during the period of December 23 through 25 when many plants in PJM were unable to deliver power to the grid when called upon.

Adjusted EBITDA during the quarter was approximately $5.2 million compared to approximately $0.3 million in the same quarter a year ago and negative $3 million in the third quarter of 2022. It is important to note that the company’s intense focus on cash cost reductions began to materialize in the fourth quarter.

During the quarter, we continued to operate in an environmentally beneficial way, removing approximately 295,000 tons of coal refuse from piles and returning approximately 173,000 tons of beneficial use ash to remediate these toxic coal piles.

Moving on to Slide 9 to discuss a fresh look at guidance for the next 12 months, you will find that the drivers of our cash flow have shifted from our prior guidance, and yet our guidance is quite similar to what we previously communicated. When we last provided guidance, power prices were more attractive than Bitcoin mining economics.

Since then, forward power prices have fallen, but hash prices risen, and we now expect to exit the year at 4 exahash instead of 3. This illustrates the strength of our business model.

It is important to note that our hash rate guidance does not include 25 megawatts of owned end-to-end data center infrastructure, including 20 of our proprietary strong boxes transformers, breakers and switchgear that are currently in inventory waiting to be deployed. This is almost 1 exahash of upside to our current guidance.

I will now turn the call back over to Greg for closing remarks..

Thank you, Matt. In summary, we believe that we’ve made significant progress on our strategic plan to enhance liquidity, improve operational efficiency opportunistically build our mining fleet and ultimately maximize shareholder value.

Our vertical integration and power market optionality continues to provide us with strategic advantages over many of our peers as does our data center infrastructure that is fully built out with additional slots open. With that, operator, let’s open the call up for questions..

Thank you. [Operator Instructions] And our first question comes from Chase White from Compass Point Research & Trading LLC..

Thanks. Good morning, guys. So just curious, I mean, your fuel costs were like 60% of what they were in the third quarter and the prior quarter. So just trying to understand what drove that down so much? And was there like a one-time credit or something? And then I have a follow-up..

Sure. Hey, Chase. Good morning. So there was a combination of things. REC prices moved up considerably over the course of the fall into the winter. Second, annually receive our waste coal tax credits once a year. And so you – we earned those over the course of 2021. You received them in the fourth quarter of the next year.

And so we received the waste coal tax credits during the course of the fourth quarter. And similarly, in 2023, we will receive the waste coal tax credits, again, kind of towards the fourth quarter. But then additionally, we spend a lot of time on fuel mix and optimizing it as we went through the outages.

And as you know, 2022 was rampant with inflation throughout the supply chain, including diesel, ammonia, which drove up most of our input costs that we suffered from over the course of the second quarter.

And as we moved out of the second and third quarter, we started to see some of the normalizing of diesel ammonia other costs flow through, and that led to a pretty meaningful improvement in costs over time over the course of the fall into the early 2023 period.

We think that fuel costs will be down considerably in 2023 over 2022, the magnitude of which is yet to be determined, but there will be a mix improvement. We think there will be almost in every line item, we’ve seen costs start to trend in the right direction for us. And so we’re optimistic about fuel costs in ‘23. REC remained elevated.

The tax credits, the plants ran much more in ‘22 than 2021. And so our tax credit in 2023 receipt will be up considerably from 2022 and so most things are going in our favor in fuel costs in 2023..

Got it. Very helpful. And then with things now moving in the right direction, I mean, do you guys expect to start holding Bitcoin again, building that up on the balance sheet? Or are you still kind of at the point where you need to be selling virtually all of it in order to ensure you can pay the bills..

Well, every day is an optimization, exercise every hour. You don’t really want to turn the plants on and off rapidly, but we have the ability here to import at very low prices. We’re not locked into a PPA or any sort of power agreement.

And so we can either deliver power at our price or we can – at our cost, or we can import and it’s an optimization of cost of energy. And right now, obviously, with power prices off, it makes sense to convert as many electrons as we can that we’re making or importing and maximizing our data center consumption of electricity and mining for Bitcoin.

We’re converting to Bitcoin. Revenue for Bitcoin is $90 to $100 per megawatt right now, far in excess of where power prices are. So it makes sense to mine optimally..

Got it. Thanks. Very helpful.

Chase, I apologize, and just to sort of follow back up with your question. Our capital cycle in 2021 and ‘22 has largely come to an end.

And so we have been ratably over the course of the fall and into the winter as we’re working through these material deleveraging events, trying to get our balance sheet in the right place and cutting costs made sense to ratably monetize our Bitcoin and convert it to USD.

And so – and we avoided significant depreciation in the price of Bitcoin last year with that method. We continue to vigilantly manage leverage and optimize for liquidity. And so I think we’re going to continue to take a balanced approach on having enough cash around to fund the business.

Right now, we are in the market negotiating to fill our data centers as we described in our press release. And the best hedge we have for that is to hold some Bitcoin if mine prices were to go up, which we have not seen yet, but if minor prices were to increase, holding Bitcoin is a nice hedge for that.

And so we have – I would say we’ve held a little bit more Bitcoin, a little bit longer as we’ve moved out of the mid-year of the fall into this 2023 period. But I still expect that we’re going to take a balanced approach and monetize ratably by just maybe over slightly longer holding periods..

Got it. Thank you..

And thank you. [Operator Instructions] And our next question comes from Chris Brendler from D.A. Davidson..

Hi, thanks, and congrats on the success here, pretty impressive. I wanted to basically follow-up on Chase’s question about expenses in terms of the mining operations and power sales. Sort of quite lower than we expected on the fuel side.

It didn’t look like there was any one-timers or any significant one-timers in operation and maintenance this quarter. So I’m calculating it sort of close to a 50% non-GAAP gross margin.

I just wanted to know what does that look like in the first quarter? I imagine it won’t be quite as high and maybe if you could just talk about some of the puts and takes there. Thanks..

Sure. So I just want to make sure I understand the question. We were flexibly curtailing in the fourth quarter as power prices dictated it. And we definitely saw an expansion in gross margin, particularly in December as power prices rose and our cost of energy was moving towards our favor. And so that was a key piece.

Every line item, the cost started to trend down fuel costs, O&M – I mean, O&M was a step function improvement in the fourth quarter over the third quarter. Part of that is a function of outages in the third quarter. And part of that is a function of improved fixed cost amortization into the fourth quarter.

And so I guess the good thing is those trends continue to be a tailwind into the first quarter, in terms of the absolute level of those costs. Power prices came off, obviously. We’re a price taker.

And so gross margins obviously compressed into the first quarter with power, but a pretty material offset has been the expansion of hash price and Bitcoin price as we moved into 2023.

We’re not going to give first quarter guidance today on the call, but we’re glad that the business model has the flexibility to – if it doesn’t make sense to sell power to convert it to Bitcoin.

And we’re glad we have the flexibility to import electricity instead of make it, which gives us a pretty good buffer with our gross margins, and that’s going to be pretty constructive, we think, especially relative to peers as we go through 2023..

Okay. That’s helpful color. Sort of a related question. I like the way as you think about the trade-off between mining and selling power, I think you were giving some converted metrics, like what kind of Bitcoin price we’re looking at in terms of where that line is.

I don’t know if I missed it this quarter, but can you talk about – given the extreme volatility, I think we’ve seen in power prices? Like where is the Bitcoin equivalent today? And what does it look like on the forward curve?.

Yes. So – go ahead, Greg..

I think just – I know everyone sort of speaks in Bitcoin that’s probably seen in this call. So to convert Bitcoin to power an efficient machine will make more than $100 a megawatt hour equivalent. And so obviously, it takes pretty high power pricing to power more than $100 a megawatt to want to divert power back to the grid.

At the same time, our cost of power, as we’ve disclosed, is now well below $50 a megawatt hour. So, even when they are running the plants, we can make a healthy margin on those efficient machines. The benefit we see today is that if you look at like PGM pricing like right now, as I’m speaking, it’s below $20 a megawatt hour.

So we think that’s a cost advantage that few other miners would have. So as we’ve talked about in cases like now, we have – we’re focused now on making power, but on buying it at that cheap price in the grid and converting it to Bitcoin. So – and prices – when prices are super high, or I think above $100 a megawatt expect us to sell to the grid.

When prices are low, expect us to buy. And then there is obviously the cases in between. Ironically, a little bit, one of the impacts that we see over the medium and definitely long-term is the impact of renewable energy installations into PJM or grid is having the effect of increasing pricing during some periods and decreasing in others.

So it’s like we’re creating a grid that is a little bit less stable because we’re taking out sort of what you’d call baseload fossil fuel plants and replacing them with intermittent solar and wind assets. So when power is cheap, it can even go – it can go negative.

And so we’re in a great position to take advantage of what is quickly becoming sort of the new reality in the power market. And hopefully, we will have others agree with us that this is a really valuable option. Long way to answer this question, but here you go..

That’s great color, Greg. Thank you. Maybe I could squeeze in one more. Just – I guess I’m surprised and pleased to see the progress with the minor VA and MinerVa, and how these – you’ve almost gotten all the value out of that contract. We mentioned that are performing largely in line.

Is there a significant difference been the rest of your fleet and those machines in terms of efficiency and uptime? Or is it actually pretty close?.

They still lag a little bit. So I think if you think about the MinerVa deliveries. The first batch have got was really the disastrous match and that the uptime with those early machines was low. We have problems with the power supply units that they sent.

And I think if you were to grade MinerVa on the later deliveries, their performance is more in line with what we would expect it from a sort of more seasoned manufacturer and also, I think, credit to our own engineering team, we have sorted out what the fixes are for the machines and can now get them to be a little bit higher.

So I think overall, the performance, we’d say is pretty close to what was originally expected, I would say, that are in line with those expectations. But I think it took a little more work to get there on the progress..

That’s great color. Thanks so much, and congrats on the progress..

Thanks..

And thank you. [Operator Instructions] And our next question comes from Lucas Pipes from B. Riley. Your line is now open..

Yes. Thank you, operator. This is Nick calling in for Lucas. Appreciate all the color so far. I think most of my questions have been answered.

But you noted building the fleet through purchases of distressed rigs, and I was just hoping to get some color on kind of where you see pricing today, have you seen prices tick up with the recent BTC recovery? Or is kind of the oversupply holding prices at the lower levels?.

Yes. So Luis – Nick, sorry, with regards to Lucas. We haven’t seen prices return to anywhere near their prior levels. We would just describe them as the market is still oversupplied with miners. And I would say pricing hasn’t fallen further. But I would say has stabilized at the lower levels.

But I think it’s – those that have the means to pay for miners, it’s still an all you need to say for them if you want them..

Great. Great. Greg, that’s really helpful.

And maybe just one follow-up on that, would you be looking at a similar miner that you have in the fleet today, call it, S19j Pro or would you be looking for something more like a S19 XP where you might realize some more power efficiency?.

I think the XPs haven’t been an interesting to us because they are still expensive on a petahash basis relative to what we think the value is versus some of the other also more efficient machines.

I think what we are really focused on is – and you should be two is just if you understand the leverage in our model, getting to four exahash is important to us. We can dramatically increase cash flow by refilling our data centers. We have all this infrastructure in power plants, all the infrastructure and we fully built out data centers.

And so we are now carrying a – we have a cost that reflects the ability to house for exahash data centers, data center miners, and we are only at 2.6 exahash today. And so it’s just the incentives and the accretion by filling data centers is so strong, they were mostly focused on, hey, just get it filled.

And then the secondary question is, can we get it filled with as efficient a minor if possible, and we think we will be able to do that. So, I think not quite XPs, but close as would be the answer on what we are looking at right now..

Got it. Helpful, that’s very clear. So, thanks again and continued best of luck..

Okay. Thank you..

And thank you. And one moment for our next question. And our next question comes from Kevin Dede from H.C. Wainwright. Your line is now open..

Thanks gentlemen. Greg and Matt has done a great job sort of laying out the power profile and the opportunities that you have in different scenarios.

I guess what I am wondering is when you look back over the past, say, ‘21, ‘22 operating timeframes, how often have you seen those power prices dip below that sort of $50 – $45 to $50 per megawatt threshold that sort of suggests your opportunity to buy power versus mine? And then how would you suggest when we look at that going forward, given sort of the downturn in the power curve, and then how do you evaluate that time it takes to wind the plant down and then spin it back up again?.

Sure. So, I would just set the table by saying that we are price takers in the power markets, and that comes with a fair amount of volatility. And so there are always going to be opportunities like they were last summer, like they were over the course of the winter to capture that pricing convexity that upside.

And that’s why you invested a plant so that when you want to capture that and deliver power to the grid and reliability of the grid, you can do that reliably. And when you think about the forward curve, as price are the forward curve is between $40 and $45 in our pricing notes within PJM over the course of the next 12 months.

And so that means embedded in that are going to be peak hours in July and August and December, January and February of the winter sort of end of ‘23 into ‘24, you are going to have times where you are selling as much power the good as possible.

April, May and June, September, October, November, those are the shoulder months, where seasonally demand collapses relative to the summer and winter and the power markets loosened. So, we are at the very beginning of what looks to be an incredibly loose power market in April, May and June.

And so we expect to be able to import, purchase power at a very low price. The forward power curve is currently, I think high-20s, low-30s as we move into the shoulder months. The last 1.5 weeks, we have been capturing price that’s half that for a big chunk of each day.

And so we actually think that we are optimistic about the ability to import power and lower our variable cost, lower our overall cost of power over the next three months and then in the shoulder. But we still want to be prepared and able to deliver power to the grid when the power is called for via price during those peak seasonal periods.

And so for us, we are in the energy arbitrage business. We are – we want to be able to have the lowest possible cost, and we have the ability to have two different revenue sources and optimize, and that will continue to be the case..

Yes. I think just one thing to add, when the plants are running, because power prices justify it. We have the ability to very quickly, literally within a few seconds, divert power to the grid by shutting down the data centers. So, that is – I think it’s a more lengthy process to go from dark power plants to turn them on.

But once the plants are on, we can easily and quickly divert that power to the grid within seconds, which we have applied for and received our designations from the good operator, demonstrating that we have the ability to do that one in a second, which is a very stabilizing sort of tool for the grid to have access to that power.

So, I think you don’t think about it as just a binary option, it’s a multi-way option, on power, both high power pricing gives us a great opportunity, low power pricing was a great opportunity. And then because we can toggle that data center on and off, we can take advantage in between as well.

It’s happening like looking backward, the grid on a go-forward basis isn’t the same grid that we saw years ago. The trillions of dollars of infrastructure bill spending is making it into our national power grid. And it’s causing for higher power pricing on one end at certain timeframes, and lower power pricing at the other end.

So in a way, our plants are perfectly situated for that in the environment that we are entering given the modifications in power infrastructure that we have.

The solution for the grid would be to install like industrial scale batteries, which is really very polluting and that really a great solution or you can do things like demand response for big data centers like ours, which is what we think is going to happen more and more. But go ahead, sorry, I interrupted you..

No. I was sort of looking at it from an operating perspective as well, right? I understand that that’s a lot of heavy equipment to turn on and off when you are burning coal and creating steam and running the turbine.

So, I guess what I was wondering is how you factor that in, right? So, Matt’s alluded to a power curve that looks really beneficial for buying power.

So, my takeaway is, hey, shut the power plants down, right? If you are not going to need them until summer peak months, right, do you just go cold?.

Yes. I think that’s what you can expect. We may end up running, it’s not – it’s almost that simple. But because we have something called demand charges, and we have the need to sell more power to the grid and we buy from it across two plants. There are nuances to that answer.

But a generality is, yes, if over the next period of time, we are expecting the power prices to be in the 20s, it makes sense to shut them down and to buy power. With the caveat being, hey, there might be situations where we need to make power to quote net out and deliver more power the grid than we are consuming.

And that would – that could end up saves more on a net basis than just buying power in that way, which is as a generator, it’s unique to us. I think a lot of Bitcoin miners are under PPAs that don’t have this kind of flexibility.

And they probably aren’t as transparent as we are in terms of what the net power costs are given that our cost we can describe as an all-in basis includes transmission, includes tax and includes ancillary fees that others might not be disclosing.

So, I think if you were to study us over a period of time, I think you would you would determine that we have to have among the lowest cost of power of any minor given our asset base..

Okay. Fair enough. And you have alluded to having maybe 14,000 plugs to 15,000 plugs available.

I am wondering how you might characterize Foundry’s appetite and whether or not we might expect them to go from the 4,500 miners you said they have deployed with you to using more of those plugs or how – I guess how should we think about your timeline to purchase given your four exahash target?.

Yes. So, I think the guidance that we are giving is towards the end of the year, that we will have the data center full. But it was certainly – I don’t want to make any comments on any other miner on whether they are going to host with us, expand with us or not, that’s sort of they should answer their own questions as what they want to do.

We – it’s publicly known that these slots are available. And we intend to fill them. If we can fill them, there are a variety of ways to do that. One is just to go buy the miners. A second would be to do a hosting deal like we have done with Foundry. A third could be a blended deal where you could say, do a miner for equity exchange.

And probably a variety that I am not even mentioning here, but I think it’s a – to have the slot empty in conjunction, there is a slot being empty with our low cost of power, expect them to be filled by the end of the year. That’s what we aspire to do..

Fair enough. Matt mentioned an additional 25 megawatts.

Is that a Panther, complete inventory ready to power or supply another 25 megawatts for mining?.

Yes. So, I think what we are referencing there is we don’t have room for that 25 megawatts at our existing data centers. So, we are looking at a variety of options as to where to put those megawatts.

So, to fully fund the part is we have the transformers, the containers, the switchgear, sort of it’s a it would be a small amount of CapEx to be able to install that data center given we have the CapEx-heavy part of the cost already in our possession, unencumbered, But we are not ready yet to state where that 25 megawatts will come from..

Fair enough. I am going to press you a little bit more on that, Greg. Your next 12 months forecast look favorable, right, from an adjusted EBITDA perspective.

It seems to me that given you have worked really hard to de-lever, how would you consider adding a third power plant, which I seem to remember was part of Stronghold’s original plan, I think going back to ‘21?.

No. We – obviously, right now, I think we have no interest in re-levering the balance sheet. So, I do not put that in any model. We are going to stay….

I wasn’t going to go there. I just wanted to know how you thought about it..

Yes.

And I think what you would expect is, hey, there are a number of Bitcoin mining operations that got halfway done, that maybe entered into or got close to entering into power purchase agreements even in our own neighborhood, which is probably where we want to stay, to expect us to have that 25 megawatts at a site that we don’t own, where we buy power on maybe a subcontracted basis from either another miner or from a power producer.

It’s not – it’s really a – it would be significant for us to go from four exahash to five exahash. And so we are focused on that. But we are not going to buy another power plant to do it. We think there are opportunities in our neighborhood to plug that infrastructure in and just buy the power, some power rate.

It will probably cost us more than if we were to make it ourselves owning the plant, but that’s not going to happen this year..

Okay. Thank you. Thanks for taking my questions. Appreciate it..

Thank you..

Thanks..

And thank you. [Operator Instructions] And I am showing no further questions. At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Beard for closing remarks..

Great. So, thank you, investors. Thank you, analysts for your interest. And we have had a – 2022 was an extremely painful year for the company. We set ourselves up to survive through all of these restructurings we did with our lenders, we are thankful to them as well, in addition, just – one of our vendors.

So, we are – I am happy to say that we are through the woods here and have a lot of upside to our model. There is a lot of accretion that we can have with the growth activities that we are working on. And we look forward to posting on the market on our progress. Also, thank you to our teams at the power plants, at the data centers and the finance team.

Thank you to my partner, Bill. So, we are happy that we will have sunnier skies ahead here, and we are positioned to take advantage of it. So, thank you everyone. Bye-bye..

Thank you for joining us today for Stronghold’s earnings call. You may now disconnect..