Earnings Call Transcript - IREN Q2 2022

Operator, Operator

Thank you for standing by, and welcome to the Iris Energy Earnings Call First Half Financial Year 2022. I would now like to hand the conference over to Mr. Dan Roberts, Co-founder and Co-CEO. Please go ahead.

Daniel Roberts, Co-founder and Co-CEO

Hi, everyone, and welcome. We're excited to conduct our first earnings call, and we appreciate you joining us. I want to highlight a disclaimer before we continue; there will be forward-looking statements, non-IFRS financial measures, and industry statistics that I encourage you to review later. Now, let’s get into the business. We are a sustainable bitcoin miner, focused on building, owning, and operating our proprietary data centers. From the beginning, we have aimed to utilize excess renewable energy and address market challenges while creating positive impacts. Today’s agenda is to provide an overview of our company. After my introduction, our President, Lindsay Ward, will share updates on our sites under construction and our operations. Then Anne will present our financial results. To start, I want to set the context. The cryptocurrency sector can be complex, with many narratives and information that can confuse investors. Our operations are guided by the framework of the 4 Ms, which I came up with a few years ago in Sydney. Initially, we identified three important factors: miners, megawatts, and money. The fourth, management, has since been added. The miners represent the computers we use; they generate bitcoin simply by crunching algorithms. We plug them in and connect them to the network. Next, power is crucial. We need reliable and sustainable energy sources to operate effectively. The third component, money, is essential to fund the development of infrastructure and acquire mining machines. Finally, management is key to ensuring we build sustainably and grow our business effectively. I’ll delve into each of these components to better explain our approach to the sector and our operations. Starting with miners, they are our revenue drivers. We have secured 15 exahash of computing capacity; some of this is operational while the rest is being built in British Columbia and Texas. Most of this capacity comes from BITMAIN, with an average cost of around $40 per terahash, totaling about $600 million. This is favorable compared to current market prices of $60 to $80 per terahash, and we are pleased with our position. Regarding the delivery of miners, everything is proceeding as planned and on schedule. Each month, we are receiving hardware from BITMAIN, and it has been shipped punctually. We often hear concerns about COVID and logistics, which do have an impact. However, we are managing in the current environment. Shipping costs have risen, and we are incurring some additional expenses. It takes a little longer to get through the ports, but the critical point is that the chips are still being shipped, and we are continuously receiving them and expanding our platform. Now, let's discuss megawatts and where these machines will be connected. Our main site in Canal Flats has been operational for several years with an initial capacity of approximately 0.7 exahash, which we've increased to 0.8 exahash through more efficient hardware and improved operating conditions. This facility is fully operational and performing exceptionally well. It has also been the foundation for our proprietary data center design iterations over the years. Unlike using shipping containers or old warehouses, we construct our own data centers, where we've concentrated our efforts on optimizing ventilation and infrastructure to ensure long-term capabilities and operational efficiencies. As for our upcoming sites, we have announced three locations: Mackenzie and Prince George in British Columbia, Canada, and another site in the Texas Panhandle. To go through each of those: Mackenzie has a total capacity of 50 megawatts. We expect all of that will be online by the end of Q3. And the first 9 megawatts, we expect to be online by early second quarter. The reason we can bring that 9 megawatts on a little bit earlier is because we've been able to tap into the distribution line, so the lower-voltage transmission line, to get some initial capacity up and running. And we expect that will come online, as I said, early Q2. Prince George has a total capacity of 85, of which 50 we expect to be available and operating sometime in Q3 as well. Construction, Lindsay will go through in a little bit more detail. And an additional 35 megawatts in 2023. The final site that we've announced is a 600-megawatt site in the Panhandle. We have signed a connection agreement, and construction has commenced on the substation there. Again Lindsay will give you more detail, but where that leaves us in totality is line of sight on clearly installing the 15 exahash that we've contracted for; as well as excess capacity of around 7 exahash, where we have the option to go and procure additional hardware in due course and install it at that site. It's also really important to note that we still have an additional growth pipeline of over a gigawatt beyond these 765 megawatts across Canada, the U.S. and Asia Pacific. We've got a development team internally. They continue to engage in new markets, talk with utilities, work with local government regulators and energy companies to work out where we can continue to grow and support these energy markets. The discussion now shifts to capital, which is essential for facilitating our operations. We're pleased to be the first bitcoin mining IPO supported by major investment banks, with nine banks and advisors backing us in this process. Their ongoing support has been invaluable, and we're proud of what we've accomplished. To date, we've raised around USD 500 million, with approximately 90% or USD 450 million coming from equity and about USD 50 million through hardware financing. We've had a few questions around fully funding the 15 exahash. So will you need to come back to market? Are you going to need to dilute? Do you need equity? And our position to date is and remains we do not expect to come back to the equity markets to raise any additional capital to fully fund that 15 exahash. We expect to fund that through additional non-dilutive funding options such as hardware financing and corporate debt. We'll give more detail in due course. As always, we'd rather tell you what we've done rather than what we plan to do per se in detail, but the intention is to provide a pathway to being fully funded in the near term and communicate that to the market. Hardware financing structures are common, for those that are new to the sector. And these arrangements, which we've secured $50 million to date, generally involve financing of the computers themselves, so often it will be lending into a special-purpose vehicle where the lender will take security of those machines and lend an amount of capital against those machines. In some instances, the loan-to-value ratios can approach 60%, 80%. So we don't expect any issues there. We've got time. This is a 12-, 15-month CapEx profile; and we'll continue to update the market as we make progress in that regard. If we move to the next slide. The fourth M is management, so a little bit about us. And some of you will have heard this before, but my background, PwC then Macquarie across Sydney and London, developing infrastructure and renewable energy projects. I was then involved in establishing an infrastructure funds management business about a decade ago called Palisade. Look, right place, right time. We grew to around $6 billion in assets, ports, airports, wind farms, solar farms, majority greenfield construction assets. My brother and co-founder Will, he was also at Macquarie doing structured products into traditional mining businesses; and in fact, was involved in setting up their digital asset team back in 2017, 2018; and as part of that, though, engaged with the CME futures and actually invested balance sheet in bitcoin mining. And then it was around early to mid-2018 that we saw the opportunity and jumped out to form Iris. We've been delighted to partner with a number of really experienced, successful people as part of this business. David Bartholomew, just to mention a couple on the page, built a listed energy and infrastructure business in Australia called DUET. He was CEO for 10 years. He's now Independent Chair of Iris, sold that business for about USD 5 billion in 2017. Brian Fehr and Brian Fry are worth flagging as our essentially founding shareholders in British Columbia. So Brian Fehr, Canadian industrialist; really experienced business builder across the construction, fabrication and energy industries. He has the Order of British Columbia, which was actually given to him for his work in regional communities. So being a very good partnership with Brian, we expect that to continue. And then Brian Fry actually co-founded a company called RackForce in the early 2000s, which grew to be Canada's largest cloud computing center before he sold out about 5 or 6 years ago to a listed company. So that data center, construction DNA, was in the business early, complemented Will and I and our backgrounds early on and really allowed us to develop and iterate these data center designs, which I'll get on to. The final person I'll mention is Lindsay Ward, who will be speaking shortly. I've known Lindsay for ten years. We worked together at Palisade, where he managed most of the infrastructure businesses. He is an extremely experienced infrastructure operator and builder. I'm excited that he joined the team last year after working with him for most of the past decade. It has been wonderful to have him alongside Will and me as we execute our plan. So moving on. We have had a number of broker reports initiated on the business, as you can see from below; encourage you to reach out if you have relationships with these advisers. Some of their reports are extremely well done, detailed and analytical. Again encourage you to reach out to those names listed below if you'd like to read them. If you don't have those relationships, don't hesitate to reach out; and we'll see what we can do to help facilitate. Now a couple of other things just before we pass off to Lindsay to talk about the specific sites, a few things about our philosophy. So why do we own our infrastructure? Why have we made such a big point of owning, controlling the land, the substation, the grid connection infrastructure, the power contracts, our own data center design? We own and operate the computers. Really it all comes down to risk. Like we have backgrounds in long-term infrastructure where we're used to thinking 10, 20, 30 years asset management plans; locking down risk; delivering long-term stable cash flows. Now obviously the stable cash flows in this sector are subject to a commodity price, being bitcoin, that is not so stable, but that philosophy still resonates through build out long-term infrastructure, manage your operations and structure it the right way. By owning and controlling the entire stack, we create a lot of certainty for our future. Since we operate our own data centers, we are not dependent on short-term contracts or lease agreements, which could bring risks if we cannot renew them or secure the necessary capacity with favorable terms. This ownership also leads to significant operational efficiencies. Owning the entire stack motivates us to optimize our bottom line, as there are no conflicting interests between the infrastructure owner and the computer owner, and we're starting to see the benefits of this approach, as highlighted in upcoming efficiency data from analysts. Additionally, owning and controlling everything grants us tremendous flexibility. For instance, we can respond to the energy market's pricing signals. Recently, we faced another severe cold snap in Texas, and when conditions are right, we can utilize cheap surplus power. However, during high-demand periods caused by weather events or network outages, we can adjust our energy consumption accordingly. Additionally, there's capital structure flexibility that comes with total ownership, allowing us to explore various financing options such as hardware financing and traditional project finance. Limited ownership may restrict the options available. Focusing on capital structure flexibility and different financial opportunities will be a priority over the next few months. As I mentioned earlier, we build, own, and operate our proprietary data centers to optimize performance and ensure the longevity of our assets. We avoid putting our equipment in shipping containers, overheating, or allowing dust to accumulate. These chips are extremely valuable and profitable; taking care of them is essential for their long lifespan, which can be compromised by humidity or dirt. As mentioned earlier, one of the analysts on Twitter has been tracking mining efficiencies among various bitcoin miners. We're happy to report that we've been ranked number one for four or five consecutive months. This ranking reflects our efficiency in bitcoin production relative to our installed computing power. For instance, if a facility operates at only half capacity because it's down for half the month, that impacts production. We're pleased to see the market acknowledging the quality of our data centers, and we are continuing to implement this design at new sites. We've been focused on using renewable energy since the beginning; for us, it's a fundamental requirement. It's essential to build a social license to operate and integrate into local energy markets and communities, ensuring they are part of the journey. As we enter these markets, using land and infrastructure that belong to others, it's important to contribute positively. In an industry that not everyone fully understands, giving back is crucial. We approach this in a few different ways, particularly in the energy market. In the next part of the discussion, we will address local communities. Currently, we are supporting energy markets in two distinct ways. One example is British Columbia, which operates under a regulated market structure. They have an excess of hydro power but are still constructing large-scale hydro facilities despite the decline in industrial manufacturing, particularly in the pulp and paper sector over the past decade. Typically, when there is an oversupply of power, prices would drop; however, due to the regulated nature of this market, power prices must actually increase so that BC Hydro can achieve the returns expected by regulators on their investments in generation and transmission infrastructure. With fewer customers in the energy mix, the rates for those remaining have to rise to ensure that BC Hydro recoups its costs. Our involvement in this market allows us to utilize much of the surplus hydro, providing BC Hydro with an additional revenue stream, which in turn helps keep power prices lower for both industries and households in the province. In deregulated markets such as Texas, this is probably a more common example that you've seen elsewhere. It's all about this heavy penetration of renewables. So over the last decade, we've seen a lot of Western markets experience the perfect storm of declining manufacturing industrial loads, the build-out of residential rooftop PV contributing to a net reduction in demand in the market. And then you've had supply-side decarbonization policies basically forcing wind and solar onto these grids in the absence of a market price signal, so not only do these markets need load to support the generation assets that are in place. They also need to solve the system flexibility issue. So again when the wind blows, the sun shines, there's plenty of power. And prices are often negative and in some instances curtailed entirely. The energy is spilled or the generators are turned off, but you get these small number of time periods each year where the market has lost that resilience. They don't have the same baseload capability. And they're trying to solve for these 1% to 2% time intervals, whether there's a weather event, a network outage. Big freeze in Texas is a key example where you need backup gas generating power. You need lithium-ion batteries. Or you need bitcoin mining. Bitcoin mining comes in, mops up that surplus power; and they can provide that system flexibility when the market needs it. In terms of local communities, we've partnered with the local First Nations for our first site in Canal Flats, a CAD 500,000 a year grants program, where we're working closely with 4 of First Nations communities there. We're also engaged in a number of other initiatives around Canal Flats and the broader region. Again it's something that we'll look to continuing to do in the future. We're engaged with similar organizations in respect of our next sites and we'll continue to work alongside communities in which we operate. G, governance. We've covered it on the E with the power and the renewables, the S with the community. G, as mentioned before, we've been really focused on building an institutional-grade platform that goes to the quality of our infrastructure; our approach to risk when it comes to contracts, ownership of land and controlling our own destiny; ensuring that we're never putting our destiny in other people's hands, but it also goes to a transparent and accountable organizational structure. I mentioned David Bartholomew earlier. He has a decade of experience in building and leading a publicly listed energy and infrastructure company in Australia. His expertise is invaluable, alongside Mike Alfred and Chris Guzowski, who are also seasoned investors, directors, and business builders. We have all the necessary corporate governance documents, policies, procedures, and audit and risk committees in place. Ultimately, we are accountable to our shareholders and act as custodians of their investments, which we take very seriously. Our focus is on safeguarding their funds and building a business that looks to the long term while considering risks. Now, regarding HODL considerations, we have received questions about why we don’t hold onto the bitcoin we mine today. We maintain a very positive outlook on bitcoin, and we have built a business that is not solely reliant on bitcoin without a strong degree of optimism; many of us also personally hold it. We have options in this business, and I want to highlight that if we mine a bitcoin today, we face a decision: should we keep that bitcoin on our balance sheet or sell it to finance the 10 miners we have on order that will generate additional bitcoin for us? We are very optimistic about the long-term potential of bitcoin. I think we'd rather deliver a greater exposure to our investors in bitcoin. So today when we've got $40 a terahash in secured miners, while the return on investment is so high, it makes sense to reinvest that cash flow, generating more bitcoin, more upside for our shareholders, rather than just hold a static asset on balance sheet. Now in the future, as and when we deliver substantial capacity, we'll look at that and say, does it make sense to continue reinvesting? Does it make sense to start holding bitcoin on balance sheet? What does the market look like? Does it make sense to start paying distributions? One of the things in bitcoin, it's not your key. It's not your bitcoin. Are we better off distributing bitcoin dividends to our investors rather than putting them with a corporate custodian and a centralized control of those keys? There's lots of options, lots of considerations. And all we're saying is today the return on investment, as evidenced by that bitcoin every 7 months, is such that it just makes sense to continue reinvesting in delivering first that 15 exahash and then evaluating where we are beyond that. In terms of financials. I've mentioned return on investment. As you can see, we've announced to the market our current contractual profile. To be clear: This is not a forecast. This does not account for any additional hardware orders. This is only what we have signed binding contracts for and/or have received and are operating today. So we've announced that, by early 2023, we'll have 10 exahash of that capacity installed, delivering a mining profit of around $550 million, $600 million on an annualized basis. The 15 exahash, the last miner is due to be delivered September next year. Once that's all installed, based on the current market, it would be doing around that USD 800 million to USD 900 million per annum in annualized mining profit. We've also attached some links to an online calculator there for those that are interested. The PowerPoint presentation is actually on our website. Feel free to download that. You can play with your own assumptions around global hash rate and bitcoin price. We've then included a slide in this deck, for ease of reference, where we've actually done that. So at the end of the day, the 2 key drivers of mining profitability, once you've got this hash rate installed, in terms of our revenue line: What is the bitcoin price? And essentially what share of that bitcoin are you receiving every 10 minutes by virtue of that global hash rate? So again there's a matrix there with links through to a hyperlink on the calculator. Please reach out if you'd like to discuss and go through in more detail. So on that note, I'd like to hand over to Lindsay, our President. As mentioned earlier, Lindsay and I have known each other for over a decade now. We've spent most of that time building Palisade, the infrastructure fund manager. It was an absolute thrill to have him join last year and work together on delivering a very exciting platform.

Lindsay Ward, President

Thank you, Dan. I’d like to share a bit about my background. I joined Iris as President in October of last year, and my main responsibility is to grow the business from a single operating site to a multi-site operation reaching 10 exahash by early 2023. I'm truly impressed with our team; their enthusiasm and commitment are evident throughout the organization. We are actively hiring to build a team capable of achieving excellence in every aspect of our work, with safety as our top priority. Following safety, we will focus on enhancing our performance in areas such as environment, community, governance, operations, maintenance, construction, and financial management. As for my background, I bring 35 years of experience in frontline leadership roles across various industries, including traditional mining, baseload power generation, and renewable energy, such as solar and wind. I also have significant experience in managing multiple infrastructure businesses and have participated in several infrastructure acquisitions, often working closely with Dan on commercial and operational due diligence. I have led teams in building wind and solar farms, mineral processing facilities, shiploaders, mines, and power stations. Prior to joining Iris, I spent about seven years at Palisade with Dan, overseeing the operational aspects of that fund management business. Together with Will Roberts, our other Co-founder and Co-CEO, I believe we have a remarkable leadership team that is well-positioned to drive success for our shareholders in the future. So in terms of our Canal Flats facility up in British Columbia in Canada. It continues to outperform. It's been the #1 most efficient miner for the last 3 months, according to a number of various analysts. It is 100% powered by renewables. And it continues to pump out solid cash flows and growing cash flows as we move forward with that operation. Interestingly, we've just had a real cold spell up in British Columbia back in December, minus 30 degrees; and the specialized data center didn't miss a beat. And importantly, it's also operated in temperatures last year when we had a heat wave of 40 degrees Celsius and again functioned beautifully through that period. It's down to our unique airflow system and our recirculation design which really takes advantage of the heat generated by the miners. And it also importantly helps minimize our environmental footprint, as we have no need for secondary heating or air conditioning. The design at Canal Flats has been optimized. We're continuing to learn. And we build those learnings into the designs that we're currently rolling out across our development sites at Mackenzie, Prince George and in the Panhandle region of Texas. On to our first development site which is under construction at Mackenzie in British Columbia, Canada. As Dan mentioned, it's ahead of schedule. We've got 9 megawatts there ready for delivery in early Q2 2022. I must admit it's been pretty impressive to watch the pace in which we've moved from first breaking of ground through the construction and fit-out. It's really important that we lead that construction effort ourselves. We're supported by a great bunch of contractors who really embrace the Iris Energy approach to safety, sense of urgency and our cost focus. And it's this seamless team that we are really building good-quality, long-term infrastructure that are producing strong cash flows for the next 30-plus years. We have commenced recruitment. We're drawing people from the local community. And our presence in Mackenzie is generating significant economic benefit for both the town and the community surrounding Mackenzie. We're already a significant contributor to a number of sporting clubs and service industries, and that will only grow as we implement a community grants program to ensure the whole broader community benefits from our presence. The additional 41 megawatts for Mackenzie will come online in Q3 2022. That site will then be at 1.5 exahash capability. And soon thereafter, we'll turn our minds to how can we improve the efficiency of that site. What opportunities have we identified elsewhere that can be implemented here? And what are our expansion opportunities? Our second site in Canada is Prince George, currently under construction after breaking ground in January. The first slab will be poured in the coming weeks, and we will be gradually transitioning the Mackenzie construction team to Prince George, which will provide significant cost synergies and construction insights. We are confident that the first 50 megawatts will be operational in the third quarter, with an additional 35 megawatts expected in 2023. We're committed to hiring and sourcing locally, which is a core focus for us, and this will deliver substantial economic benefits to the Prince George community. Additionally, directly managing the various construction companies alongside our own internal construction management, design, and engineering capabilities is a vital aspect of our strategy for building, owning, and operating specialized data centers. It is essential for us to have control over our construction to ensure the infrastructure we create will last for the next 30 years. Moving away from Canada and British Columbia, we're now down in Texas. We recently announced the signing of what is really a transformational binding connection agreement with AEP, 600 megawatts or 17 exahash of capacity; and we'll be building that in the renewables-rich Panhandle region of Texas. This will allow us to deliver on our 10 exahash by Q1 of 2023 and will leave a significant upside capacity as we move forward with further minor purchases. As many of you will be aware, the Panhandle region in Texas is renewables rich. And really amazing statistic, there's 32 gigawatts of installed capacity, another 6 gigawatts planned, but there's only 12 gigawatts of installed transmission lines down to the major load centers in Houston and Texas, so there's a massive excess renewable capacity that we can certainly take advantage of. It's a 300-acre site. It's massive. It's 100% owned by us. It's in a great location. It's got dual fiber access to the gate. It's got water access to the gate. We've got direct highway access, no near neighbors. And I think certainly it's a great opportunity for us to take our installed megawatt capacity from 165 megawatts through to 765 megawatts. And we're working with key suppliers, design engineers, construction companies; and we'll have the first buildings built by the end of 2022. And a key aspect is project delivery. And when you have the knowledge that we have within our business; the knowledge that we've got from building Canal Flats, Mackenzie and Prince George, the project delivery risk with the team that we have assembled is greatly reduced. And in closing, just touching on future development. We've talked about West Texas. We're now at 760 megawatts of 765 megawatts of installed capacity, yes, but we're not done there. We're looking at further growth opportunities. We've got a very agile and capable project development team focused on identifying new opportunities in British Columbia, Texas, other American states and the Asia Pacific. And we've got more than 1 gigawatt of projects under investigation at the moment. We're really excited about these global diversification opportunities, the flexibility and the optionality that they give by having multiple grid-connected sites. And they'll provide great flexibility and optionality for us in the future. So thank you for the opportunity to talk today about the operating side of the business. I'll now hand over to Anne Hayes, who will go through our financial performance. Thank you.

Anne Hayes, CFO

Thanks, Lindsay. I'm very pleased to be able to present the financial results of Iris Energy for the first period post the successful IPO in November. So as we see on this slide, we've seen significant growth over the period with our operating hash rate increasing 97% in the December quarter, resulting in 364 bitcoin mined, an increase of 51% on a global hash rate which increased in the quarter by 36%. Pleasingly, our bitcoin mining revenue increased by 93%, attributable to higher average bitcoin prices. And our adjusted EBITDA increased by 156%. We've shown adjusted EBITDA, which is a measure that's used by management, as the half was marked by nonrecurring items as a result of the IPO and noncash expenses which I'll explain on the next slide. So whilst our net profit after-tax for the 6 months was a loss of USD 419 million, it's important to call out the impact of nonrecurring and/or significant noncash items. The hybrid financial instruments converted to equity just prior to the IPO and resulted in a noncash $419 million expense in the profit and loss account. This is caused by the increase in value of Iris shares since the notes were first issued. The converted instruments are recorded as issued capital at fair value, and any increase in that fair value from the last time it was recorded is treated as a noncash fair value loss in the profit and loss account. Now all of these instruments have now been converted, and it will have no further profit and loss impact to the accounts. The share-based payments expense, which is also a noncash, is split between the founders and the other executives. The founders shares have a strike price of USD 75 and vesting conditions of between USD 370 and USD 1,850 per share. Amortization of the share-based payments takes place over the life of them, so it will continue to be a noncash expense that is taken to the profit and loss account. We also had one-off expenses on the IPO of $3 million which were incurred in the period. So after these nonrecurring and noncash items, the 6 months produced an adjusted EBITDA of $20 million, a margin of 66% on revenue of $30 million. And 2/3 of this revenue was earned in the December quarter alone, with the margin earned in that quarter rising to 72%. This slide shows our statutory financial profit and loss account, again recorded in U.S. dollars, where we've also highlighted on the slide the one-off and noncash items impacting our results for the 6 months so that it's clear. And our balance sheet. The financial position of the group has seen significant strengthening over the 6 months period as a result of the convertible notes issue, the IPO and strong operational results delivering cash flow. Plant and equipment and mining hardware prepayments have increased, supporting the rapid expansion in computing power. Total assets increased from $135 million to $495 million. And total liabilities decreased significantly from $184 million to $49 million mainly as the result of the conversion of the hybrid instruments. This leaves the group in a strong financial position. That is the end of the financial part of the presentation. And I will now hand you back to Dan to wrap up today's briefing.

Daniel Roberts, Co-founder and Co-CEO

Thanks, Anne. And thank you, Lindsay. And thank you for everyone that dialed in today for our inaugural call. A couple of quick things that we would have been asked if I had touched on earlier in the presentation. First one is around the power certainty or the access to the electrons in both British Columbia and Texas. We've had a few questions over the last little while around what that looks like, what the price is, et cetera. In British Columbia as a regulated market, once you're connected into that grid or you've got your connection agreement, you've got a regulated right or a legislative right to receive power and export power from the grid. The price you pay is the same price per kilowatt hour 24/7. It's a set price every year. It's an industrial range. It's on the BC Hydro website. It's equivalent to around USD 0.049 to USD 0.05 a kilowatt hour all in, 98% renewable content. And then we are topping up with 2% RECs as an additional purchase to round out 100% renewables. So that's quite straightforward. In Texas, the key is the connection agreement. The key is working with the utility to find parts on a network where there is substantial availability of power in that part of the network. Once you connect into that network, it's then just a function of what the market price of power is. So working with AEP, signing that 600-megawatt connection agreement, that was all done on the basis of analyzing that part of the network and understanding that there was 600 megawatts worth of electrons available for us to take from the network. Regarding the specific power price, we plan to contract it closer to the operational start date instead of paying for costly hedges and contracts upfront. The guidance available indicates that ERCOT in that area is about $0.03 to $0.035 per kilowatt hour for base load. The crucial factor is the demand response to ancillary services, which occurs during 1% to 2% of the time intervals each year. During those periods, when power prices spike above $1,000 per megawatt hour, businesses with the capability to reduce their load can significantly lower the effective power cost. Removing 1% to 2% of those high-price intervals can reduce our all-in power costs to the low $2 range. Additionally, if Texas introduces demand response and ancillary revenue programs, it could mean not only avoiding the $1,000 per megawatt hour charge but potentially earning that amount from the market. In that scenario, our power price could drop into the low $1 range. Operational flexibility is key; since we own and manage all the infrastructure, including power connections and data centers, we can adjust our operations to reduce usage during peak price periods, thereby securing lower power prices. There are markets around the world that have seen such heavy penetration of wind and solar, where there are feasible models where you can connect in and operate for a large part of the year where you've actually got 2 revenue lines. One, you're paid to mine bitcoin or take the power. So you're paid by the network to take the power because it's negative price. Two, you're then paid to monetize that into bitcoin, so there's a lot of operational flexibility in there, but hopefully, that clears up a little bit around the power price. As we've said all along, we're guiding the market towards an average power cost of $0.02 to $0.04. Where we ultimately fit within that will depend on our operational profile and also the composition of sites across different markets. So for the next quarterly earnings, we will look to implement a Q&A function and have a little bit more interaction, so we'll look to get that up for the next one. Thank you for dialing in. The greatest takeaway, our hope, is that we've got 15 exahash secured. We've got the land and power secured. We've got a team who, ably led by Lindsay, Will and myself, is executing, continuing to deliver. And we appreciate all your support. And again thank you for your time in dialing in today.