Greetings and welcome to the Tara Wolf Second Quarter 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. A question and answer session will follow the prepared remarks. Please note that this call is being recorded. I will now turn the call over to John Larkin, Senior Vice President and Director of Investor Relations with Tara Wolf. Please go ahead.

Good morning, and welcome to TerraWolf's second quarter 2026 earnings call. Joining me today are Chairman and CEO, Paul Prager, our CTO, Nasir Khan, and our 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 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 gap measures are available in our earnings release and filings. With that, I will turn the call over to our Chairman and CEO, Paul Prager.

Thanks, John, and good morning, everyone. The second quarter was defined by execution and expansion. At Lake Mariner, we converted additional contracted capacity into operating infrastructure and recurring lease revenue. At the same time, we expanded the platform through the acquisition of Muskie. Following quarter end, we executed a 401-megawatt lease with Anthropic at the Justify Data campus and entered into an agreement to monetize our interest in the Abernathy Joint Venture. Taken together, these developments demonstrate the model we've been building, which is to secure power-advantaged infrastructure, contract with high-quality customers, deliver capacity in phases, and selectively recycle capital into the next generation of growth. Our number one priority remains execution. You see that most clearly at Lake Mariner. CB3 was fully delivered and generating lease revenue in early July, bringing total revenue-generating critical IT capacity at the campus to 102 megawatts. That delivery also satisfied the applicable conditions for $600 million of Google's credit support for FluidStax obligations to become effective. TV3, therefore, represents more than just a construction milestone. It is another building delivered, another contracted revenue stream online, and a significant portion of the credit support behind the project now effective. Following quarter end, we also amended certain fluid stack leases. Those amendments increased contracted capacity, added rent associated with tenant-requested scope changes, and established updated delivery schedules on a data hall-by-data hall basis. NASDAQ will cover construction and commissioning in greater detail, but the key milestones are straightforward. At CB4, we remain on track to begin energizing the first data hall in late September. At CB5, we expect to begin energizing the first data hall in very early January. The first data hall at CB4 is already in commissioning, and we continue to work closely with Fluidstack, Google, and the broader project team to align infrastructure readiness with hardware deployment. The important point here is that CB3 is online and generating revenue. CB4 is in commissioning, and CB5 is advancing against the updated customer-aligned schedule. That is execution, and it is increasingly visible in our financial profile, with high-power compute leasing representing the majority of our revenue during the quarter. While Lake Mariner continues to deliver, the second major theme is expansion. Nowhere is this more evident than in Kentucky. Following quarter end, we executed a long-term lease with Anthropic for approximately 401 megawatts of critical IT capacity at our justified data campus in Hawesville. The agreement expands our relationship with Anthropic and represents approximately $19 billion of contracted revenue over the initial 20-year lease term. The economics are highly attractive for our shareholders and reflect the value of controlling large-scale, power-secured infrastructure in a market where capacity is increasingly scarce. But the significance of the agreement goes well beyond its size. Leit Mariner demonstrates that we can take a legacy industrial power site and convert it into a large-scale operating high-power compute campus. Justified demonstrates that we can repeat the model in a new region. We secured the site, controlled the power infrastructure, and converted that position into long-duration contract with one of the leading companies in artificial intelligence. That is our model. Control the infrastructure, contract capacity, finance it against long-duration revenue, and deliver it in phases. We also expanded our Kentucky platform through the acquisition of the Muskie Data Campus in eastern Kentucky. Muskie is a gigawatt scale development site and a prime example of the utility partnership path to power that we discussed on our last earnings call. The campus is located within an established industrial park and is being developed in partnership with investment-grade Kentucky Power, an AEP company. Our electric service arrangements were entered into under a data center tariff approved by the Kentucky Public Service Commission, which provides for one gigawatt of electric service. Kentucky Power is expected to construct a new 345-kilovolt substation connected to AEP's existing 765-kV transmission network with initial electric service expected in the fourth quarter of 2028. This is not simply land with a queue position. It is utility-supported development pathway with contracted electric service defined infrastructure obligations, and a state-approved framework for large-scale data center development. The market too often treats a Q position or inclusion in a batch study as equivalent to available power. It is not. The relevant and important questions are, when can the power be actually delivered, under what contract or commercial framework, and with what degree of infrastructure of certainty. Muskie provides considerably greater visibility for each of these points. Muskie also builds on the substantial momentum and relationships we've developed in Kentucky. The Commonwealth is increasingly attractive to prospective tenants because of its power infrastructure, business environment, and the constructive engagement we have seen from state, utility, and local stakeholders. Justified provides our near-term contracted delivery opportunity in Kentucky. Muskie provides the next gigawatt-scale platform in our pipeline, and we are actively advancing commercialization discussions for the site. Given its near-term power availability, we are increasingly optimistic about the potential to expand the Muskie campus to as much as 2 gigawatts and accelerate portions of the current development timeline. In addition to Muskie, our pipeline includes additional expansion opportunities at Lake Mariner and Lake Hawkeye in New York, Chesapeake in Maryland, and there are many other sites we are actively evaluating. Each is at a different stage, but collectively they provide multiple paths to power, customer contracting, and phased delivery, rather than dependence on a single market or interconnection process. As we expand the platform, we are also being disciplined about where we spend our time and capital. That's what drove our decision on Abernathy. Following quarter end, we entered into an agreement to sell our entire interest in the Abernathy Joint Venture for approximately $530 million. Abernathy is a great project, but at this point in Terawolf's development, it is simply not the right project or the best project for us to continue to own. Our strategy is increasingly focused on large-scale opportunities where we control the site, control the power infrastructure, the development process, and the customer relationship. All that drives long-term economics. The Abernathy transaction allows us to focus our management resources and capital on those opportunities. It also demonstrates our ability to create value through development and selectively recycle capital into larger-scale projects that we directly control. The Anthropic Lease demonstrates our ability to create long-duration contracted value. The Abernathy transaction demonstrated our ability to realize value and redeploy that capital into the next generation of growth. We've also recently cleared an important milestone at Chesapeake. On July 29th, the Federal Energy Regulatory Commission, FERC, authorized our proposed acquisition of the Morgantown site. That approval clears a significant regulatory condition towards closing. The site includes approximately 210 megawatts of existing grid-connected generation, substantial electrical infrastructure, and meaningful long-term expansion potential in one of the most power-constrained regions in the country. Subject to the remaining closing conditions and required consents, Chesapeake offers the potential to develop an integrated generation, storage, and data center campus capable of supporting up to one gigawatt of data center capacity while serving large-scale compute demand in the most competitive region while supporting regional grid reliability. We have developed our pipeline this way deliberately. Regional diversity gives us access to different power markets and utility partners but it also provides greater operational and security resilience we do not want the platform dependent on one grid one regulatory regime or one source of generation our portfolio includes utility supported grid connected campuses, sites with existing generation infrastructure, and locations capable of integrating generation and storage or supporting additional generation on the broader grid. We view Behind the Meter Power primarily as a bridge to a utility-supported grid-connected campus. Over time, we believe the most reliable, resilient, and economically sustainable power solutions will be those interconnected with a larger utility system. That concept is becoming increasingly important. The constraint on AI infrastructure is not demand. It is power, transmission, interconnection, and the ability to bring new infrastructure online responsibly. we have consistently said that data center infrastructure should be an asset to the grid not a burden to it and that is how we view governor hochel's recent executive order in new york we do not believe the executive order will disrupt our development timing at either lake mariner or lake hawkeye the wolf compute build out at lake mariner is already permitted. And Lake Hawkeyes is in the early stage of development, and it has not been impacted. Importantly, the governor has described the order as an effort to establish a framework, not a permanent ban on future data center development. We welcome such a framework. Responsible development at this scale necessarily requires careful consideration of environmental impact, grid reliability, cost allocation, and community priorities. We do not view those considerations as a binary choice between development and responsibility. Instead, we work constructively with regulators, utilities, and local communities to address legitimate concerns, operate responsibly, and be an active and valuable long-term member and neighbor within the communities in which we operate. A clear framework should establish the rules of the road around reliability, cost allocation, resource use, generation, storage, and community impact so that credible projects can move forward responsibly. We believe increasingly formal requirements for large load development are inevitable across all major power markets, not only in New York. The better approach is to prepare for reasonable standards now rather than assume projects can avoid them indefinitely. That means developing sites that can demonstrate credible and redundant power delivery, assume appropriate cost responsibility and, where required, support additional nameplate generation capacity or otherwise help bring incremental generation and grid resources online. Many of the principles outlined by the governor are entirely consistent with how Terrell Wolf already approaches development. We understand power markets, generation, transmission, and believe clear standards will ultimately favor experienced, well-capitalized developers with credible infrastructure solutions and the demonstrated ability to execute. Increasingly, data center demand is also serving as a catalyst to long overdue investment in the nation's transmission and generation infrastructure. That is where Tara Wolf is positioned. So when you step back, the progress is clear. We've delivered CB3 and brought another contracted revenue stream online. CB4 and CB5 are advancing against updated customer line schedules. We've expanded our Kentucky platform through the Anthropically Sugjustified and the acquisition of Muskie. We've agreed to monetize Abernathy so we can focus our capital and management attention on larger-scale opportunities that we directly control. And we've cleared an important regulatory milestone at Chesapeake. Together, these developments reinforce both the consistency and the depth of our strategy, build a regionally diversified pipeline with credible paths to power, contract with high-quality customers, deliver capacity in phases, and recycled capital, where doing so creates long-term value for our shareholders. Based on the strength of the platform and the customer engagement we continue to see, we reaffirm our target of contracting an incremental 250 to 500 megawatts of critical IT capacity annually. We will pursue that growth with discipline and remain focused on power control, customer quality, execution certainty, and shareholder returns. We have the sites, the capital, the people, and the customer demand. Now it is about delivering. With that, I'll turn it over to Nazar to discuss construction, commissioning, and the updated Lake Mariner delivery schedule.

Thank you, Paul. I'll focus my remarks on construction, commissioning, and delivery at Lake Mariner. As Paul noted, CB3 is fully online and generating lease revenue. With that building complete, our focus is now on executing against the updated delivery schedules for CB4 and CB5, which were developed in close coordination with our tenant. From an execution standpoint, the two most significant variables have been electrical labor availability and ongoing design optimization for our customer. Electrical labor remains highly constrained across the data center industry. As the design and electrical scopes became more fully defined, we added a second electrical contractor and scaled the workforce to support approximately 1,000 electricians at peak. That additional capacity is important to maintaining the targeted delivery schedule. At the same time, working closely with FluidStack, we continued to optimize the electrical, cooling, and operational requirements while design, procurement, and construction were already underway. Although this added complexity to execution, it enabled our customer to establish a deployment standard tailored to the latest generation hardware. With those resources and updated requirements now incorporated into the plan, we have greater visibility into the remaining work and remain confident in the revised delivery schedules. Let me now turn to commissioning and explain where CB4 stands today. Center commissioning generally progresses through six levels, from Level 0 through Level 5. Level 0 covers design and planning, while Level 1 involves factory acceptance testing of major equipment before it's shipped to the site. Our current focus is on Levels 2 through 4. Level 2, or installation verification, confirms the major electrical, mechanical, and cooling equipment has been properly installed, connected, and configured. This is also when the tenant begins installing and tuning its cooling distribution equipment. Level 3, or startup and pre-functional testing, is when individual systems are powered and tested under operating conditions. The customer also begins bringing server racks into the data hall and integrating them with the building's power, cooling, and control systems. In practical terms, Level 3 marks the transition from construction into live systems commissioning. Level 4, or functional performance testing, is the contractual delivery milestone. Once testing is complete, the data hall is turned over to operations and begins generating lease revenue. The first data hall at CB4 is currently in Level 2 commissioning. We expect to begin Level 3 in mid-August with the customer server rack scheduled to arrive shortly thereafter. We remain on track to reach Level 4 and begin generating lease revenue from the first data hall in late September. DB5 is also progressing against the revised schedule, with the first data hall expected to begin energizing in very early January. Across the project, we continue to have a highly constructive working relationship with Fluidstack, Google, and the broader project team. The revised schedules were developed collaboratively to align infrastructure readiness with customer hardware deployment. That coordination is critical on a project of this scale, where construction, commissioning, equipment delivery, and systems integration must all progress together. In summary, CB3 is operating and generating revenue. CB4 has been commissioning and remains on track for initial delivery in late September. CB5 is advancing towards initial energization in very early January. We remain confident in the revised delivery schedules and focused on converting the remaining contracted capacity at Lake Mariner into operating infrastructure and recurring revenue. With that, I'll turn it over to Patrick to review the financial results for the second quarter.

Thank you, Nazar. As Paul outlined, the quarter demonstrated both sides of our capital model, creating long duration, contracted value, and selectively recycling capital into larger scale opportunities that we directly control. Following quarter end, we entered into two transactions of significant financial importance. First, we executed a direct 20-year lease with Anthropic at the Justified Data Campus, representing approximately $19 billion of contracted revenue over the initial term. Second, we entered into an agreement to sell our 50.1% interest in the Abernathy Joint Venture for approximately $530 million, representing a 20% internal rate of return on our initial investment. I'll focus my remarks today on our second quarter results. The financial impact of the Fluidstack lease amendments, our updated Lake Mariner Capital Outlook, and the liquidity available to fund our growth. Revenue for the second quarter was $44.8 million, compared with $34.0 million in the first quarter, primarily reflecting additional HPC capacity coming online. HPC lease revenue increased 52% quarter-over-quarter to $31.9 million from $21.0 million and represented approximately 71% of total revenue. As Nasr described, the first data haul at CB3 achieved ready-for-service status in late June, and the second data haul followed in mid-July. As a result, the second quarter included only a partial revenue contribution from CB3, while we entered the third quarter with 102 critical megawatts operating and generating lease revenue at Lake Mariner. Importantly, completion of CB3 also satisfied the applicable conditions for $600 million of Google's credit support for Fluidstack's lease obligations to become effective. This represents an important credit milestone and further strengthens the contracted revenue profile of the Lake Mariner build-out. The Fluidstack lease amendments executed in early July also have several important financial implications. The revised commencement dates were mutually agreed with our tenant, and we remain on schedule with the revised timeline. Terawolf will contribute approximately $150 million to address tenant fit-out costs incurred through June 30, 2026. In return, WolfCompute expects to receive more than $300 million of incremental lease revenue over the initial 10-year lease term. Together with the previously announced increase in contracted capacity from 162 to 168 critical megawatts at each of CB4 and CB5, the amendments are expected to generate more than $500 million of incremental lease revenue for Wolf Compute over the initial lease terms. Turning to operating results, cost of revenue exclusive of depreciation increased to $12.4 million from $2.4 million in the first quarter. The increase primarily reflects lower demand response proceeds, which are recorded as a reduction in cost of revenue and declined to $2.8 million in the second quarter from $14.1 million in the first quarter. Operating expenses increased to $23.4 million from $11.2 million as we continued scaling the platform ahead of additional HPC capacity entering service. The increase primarily included $5.8 million of additional site-level expenses, including security, labor, and pre-revenue operating costs, $3.3 million of site preparation and demolition costs associated with future development, and $2.2 million of minor equipment repair costs related to assets expected to be returned to service or sold. Reported HPC leasing segment profit margin was approximately 28% during the quarter, compared with our long-term target of approximately 85%. The reported margin includes approximately $2.8 million of tenant fit-out revenue and associated costs, $6.8 million of pre-revenue operating costs at Wolf Compute, and $6.0 million of development costs across our portfolio of uncontracted development sites. Adjusting for these three items, HPC leasing segment profit margin was approximately 80%. We expect margins to progress toward our long-term target as additional contracted capacity enters service, free revenue operating costs decline, and the contribution from mature per HPC lease revenue increases. SG&A expense decreased slightly to $126.9 million from $127.8 million in the first quarter. Excluding stock-based compensation and charitable contributions, adjusted SG&A was $28.6 million compared with $26.3 million in the prior quarter. We continue to expect full-year adjusted SG&A to remain within our previously disclosed guidance range of $75 million to $100 million. Depreciation decreased to $21.2 million from $28.5 million in the first quarter. The first quarter included $11.9 million of accelerated depreciation associated with Bitcoin mining assets whose useful lives were shortened as portions of the Lake Mariner campus transitioned primarily to HPC use compared with $2.6 million in Q2. Interest expense was $56.4 million compared with $67.1 million in the first quarter, and we recognized interest income of $28.9 million in Q2 compared to $29.4 million in Q1. Cash interest paid was $125.7 million compared with $5.3 million in the first quarter, reflecting the first semiannual interest payment on the Wolf Compute Senior Secure Notes in April. We recorded a $755.7 million non-cash loss from the change in fair value of the Google warrants, compared with a $216.3 million non-cash loss in the first quarter. The change was primarily driven by the increase in TerraWolf stock price and had no impact on our liquidity. Equity in the net loss of the Abernathy joint venture was $11.1 million, generally consistent with the $11.5 million in the first quarter. Gap net loss attributable to TerraWolf was $939.9 million, compared with $427.6 million in the first quarter. The increase was primarily driven by the non-cash fair value adjustment associated with the Google warrants. Non-gap adjusted EBITDA was negative $18.3 million, compared with negative $4.1 million in the first quarter, reflecting continued pre-revenue operating and development costs incurred ahead of additional contracted HPC capacity entering service. Now, turning to the balance sheet, cash and restricted cash totaled approximately $3.0 billion as of June 30. At the parent level, we held approximately $1.2 billion of unrestricted cash at quarter end, Including the initial $250 million payment received under the Abernathy transaction in July, unrestricted parent liquidity increased to approximately $1.45 billion. We expect to receive an additional $150 million honored before December 31, 2026, and approximately $130 million honored before April 30, 2027, subject to the terms of the transaction. At Wolf Compute, we had approximately $1.9 billion of gross cash at quarter end, or approximately $1.5 billion after accounting for debt service reserves and interest during construction accounts. Approximately $2.3 billion of project capital expenditures have been completed, with approximately $1.7 billion remaining. Approximately two-thirds of the remaining expenditures are committed, providing increased visibility into the remaining capital requirements. As a reminder, our original cost guidance for the Wolf Compute financing and deployment was $8 million to $10 million per critical IT megawatt. We currently estimate total project costs at approximately $9.1 million per megawatt within that original guidance range and modestly above the approximately $8.6 million per megawatt financed in October 2025. The execution factors NASR discussed, including electrical labor constraints and evolving customer equipment and operating requirements, are reflected in this updated estimate. Following the FluidStack lease amendments and TerraWolf's additional capital contributions, we expect the project's pro forma capitalization to be approximately 32% equity and 68% debt, compared with approximately 26% equity and 74% debt at the time of financing. At the Justified Data Campus, we had contributed approximately $353 million of equity as of June 30th, including the $200 million site acquisition cost. These investments have funded the acquisition and early development work supporting the anthropic lease and the planned project-level financing. Based on our current plans and assumptions, our existing liquidity and expected Abernathy proceeds provide the capacity to fund our remaining Lake Mariner commitments, planned equity investment at Justified, interim letter of credit requirements at Muskie, the proposed Chesapeake acquisition, and other new sites we are actively pursuing without accessing the equity capital markets. Importantly, this plan also preserves a substantial liquidity reserve during the construction and delivery of these large, complex projects. We remain focused on matching capital deployment with contracted customer demand, maintaining financial flexibility, and selectively recycling capital when doing so improves control, scale, and long-term shareholder returns. Over time, we also continue to target investment-grade credit profiles at the TerraWolf parent and each of our finance subsidiaries. In summary, the second quarter reflects a financial profile increasingly driven by long-term contracted HPC revenue. We entered the third quarter with 102 critical megawatts operating at Lake Mariner, greater visibility into our remaining Wolf Compute capital requirements, and substantial liquidity to complete our contracted developments and fund the next phase of growth. With that, operator, we are ready to take questions.

We will now begin the question and answer session. To ask a question, you may press star, then run on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. Once again, that was star, then one to ask a question, and at this time, we will pause momentarily to assemble the roster.

And our first question comes from Nick Giles of B. Riley Security.

Please go ahead.

Hey, operator.

Good morning, guys. It's good to see the electric service agreements with Kentucky Power. I was hoping you could speak to potential partnerships with utilities. What kind of framework should we have in mind? Should we expect that utilities are willing to share the economics of the project, or would it kind of stop at what we're seeing here with Kentucky Power?

Good morning, Nick.

It's Nazar here. So with the utilities, I think we're seeing a couple different flavors come about. With the integrated utilities, Kentucky Power being an example and AEP being an example, I think they are independently solving for contracting for the load. So they've signed up a gigawatt of capacity with us under an LOA transmission agreement, and then they go find the generation to support that. And so whether that comes from their existing resources, they contract for it, they recently acquired a power plant or they build more power plants, they're independently solving for that. And so what they're looking for us to do is to kind of commit to both whatever the transmission build out is for that project. And so that will be project dependent, depending upon the location of that and where that sits within their grid, and then a backstop for the energy. And so part of the credit that we posted to AEP was for the energy for the initial 500 megawatt allocation as well. And so, again, the projects really depend upon the location, which will drive the cost of the transmission required to support it. And then it'll be a market, generally a market price on the cost of energy. When you put those two things together, that's where you see the credit that we've posted to Kentucky Power and AEP.

That's super helpful. I appreciate it.

But maybe switching gears, Wolf has not done a deal direct with one of the high IG hyperscalers. And so I was curious whether this is by design or what some of the key differences you see between the deals that you've done to date and one that would be with a high IG.

It's Patrick Flurry. Thanks for the question. So as I think you've heard from us many times, we are highly focused on credit quality of the tenant. That's paramount to us. And so, you know, we have terrific tenants both at Lake Mariner and at Hawesville. I think you saw us buy Hawesville in February and lease it, you know, less than six months later. That process was very robust, and Anthropic was the winner of that. It's very strong economics to us, but there were a bunch of other competitors for that capacity in that process that we have moved over to eastern Kentucky at Muskie. So I think I would just say to you, we are extremely happy with our existing partners. They are very strong credits. As you heard from us, we have the first slug of Google's backstop at Lake Mariner now effective. So I think it's a combination of credit quality of the counterparty. And that's not just today, Nick. That's us thinking about the business model today, the competitiveness of that business model. And then the credit, you know, not necessarily immediately today, but also three, four, five years down the road. These are 20-year leases, right? So you have to be front foot forward, forward thinking. So as an example, as you've seen all the hyperscalers take on more debt, you know, their balance sheets today are not going to be their balance sheets in five, six years. So I think there's an element of us solving.

And hi, this poll here. It's the same from an operation and an execution perspective. Just moving upstream to be closer to the ultimate customer. That enables precision, and that enables us to be a better service provider to our customers. So we get to deal direct now with Anthropic, and it just makes things that much more. We build out our facilities for them and how we operate the facility.

That's good to hear.

I appreciate all the color and keep up the good work.

Next question comes from Darren Aftai of Lucid Capital Markets. Please go ahead.

Hey, good morning. Thanks for checking my questions. Just two, if I may. So can you maybe balance just the appetite for executing on more sites versus kind of digesting what you have? I guess said another way, how kind of full do you feel you are? Are there limitations in kind of expanding the portfolio? And then maybe secondly, you talked a little bit about this, but you guys are operating in a few different geographies. Can you kind of talk about the calculus of what you look at from a sort of community and governmental risk perspective when you're thinking about entering into new or existing markets? and maybe if you had to characterize it, are there any markets where you feel more partial to versus others?

Thanks. Morning, Darren. It's Nazar here.

I'll take your questions in reversed order. First, with respect to just sites and locations and geographies, we've expanded into Kentucky. We received clearance from FERC in Maryland. And so we're traditionally looking for jurisdictions and sites where, you know, there's been some activity previously. And so we've had a number of brownfield sites, which we think are well situated for further development. There's likely some significant electrical activity that occurred at that site, which bodes well for the future of the site with respect to kind of repositioning that. And so we're looking for areas where some activity has occurred. The local communities understand what that means and can see the vision of what that transformation or repositioning of that asset could look like. And so fortunately for us in Kentucky, whether it's in Hawesville west of Louisville or in Muskie on the eastern side of the state, we have very strong local support in both of those communities with respect to bringing those projects forward. And the other piece is that the team spends a tremendous amount of time engaging with the various local stakeholders and informing them of what we're up to. A lot of times we find that it's a lack of information that is a challenge more than just kind of what the information is. And so the team spends quite a bit of time in each of those local jurisdictions ensuring that we're properly kind of conveying what we're seeking to do with respect to the projects. With respect to kind of just the overall portfolio, you know, the guidance we've been giving is 250 to 500 megawatts per year of critical IT. We provide that guidance for a couple of different reasons. One is there's kind of just an operational capacity. Each of these projects at the upper end of the range is still nearly $5 billion of total capital. We have to fund that with both equity and debt. We've got to hire a number of contractors, electricians, at our site in Lake Mariner. We peaked at over 1,000 electricians at the site. And so as you scale up, the ability to kind of procure the requisite labor gets more challenging. So that's one kind of component to it. The second is I think we've seen in the market, especially here over the past couple weeks and months, is that these large-scale infrastructure projects may not just work on a linear scale. So a lot of times we all look and say, okay, what's happening in this quarter or that quarter and try to roll it out three or four years. And given the size of these projects, we think there's going to be more fits and starts to it. And so trying to make sure that we pick our spots properly, have a good understanding. And I think as Paul alluded to in his intro comments, is just a position in a queue does not represent access to power. And so we really try to spend time ensuring that the projects that we're bringing forth have the ability to really kind of deliver on that power and we can capture it. And so, therefore, we can go to our underlying customers and tenants and give them, you know, very clear visibility with respect to their ability to start using that. So, I think, you know, there are a number of things that we're looking at that could increase that. But, you know, for now, we remain, you know, focused on that $250 to $500 per year. With that, I think Paul has some other thoughts as well.

Yeah, this is Paul. Thanks, Naz. And I would only want to add to that that I think regional diversity is a foundational principle in the development of our portfolio. I don't want to be reliant on one grid. I don't want to be reliant on one regulatory perspective or horizon. I don't want to be reliant on one political mindset. at. I think our customers will become increasingly sensitive to the notion of security. I'm a Navy guy, and I remember back in the day when we were looking at submarine design versus what the Russians were doing. The Russians would put all their major equipment and machinery in one part of the boat. So if you hit that part of the boat, they were dead in water. American submarine design was we would put major machinery throughout our boats so that we had the ability to sort of sustain ourselves in a conflict even if we took hits in one area of the boat. I think security is critical. Our customers don't want to be vulnerable to something that happens in one grid, one region, one fuel source. Labor sourcing, as Nazar mentioned, is important. And lastly, as you think about the move towards inference, I think folks want to move to the market as opposed to be in one place. It inferences more of a local consideration. So that's the reason why we're trying to build the portfolio as we have and we'll continue to focus on regional diversity as a fundament to what we do.

Appreciate the thought. Thanks.

Next question comes from Michael Rollins of Citi.

Please go ahead.

Good morning. So just building off the last... few questions. I'm curious, if you take all that together, are you able to size what the incremental pipeline opportunity could be, maybe kind of thinking about it over the next decade? You know, currently, you've got 2.9 gigawatts of, you know, call it line of sight of least capacity and pipeline. Just curious, you know, what the TAM is or how big that can get to. And then, you know, second, with certain regions being some, you know, new headwinds on timing, you know, for example, recent developments in Texas, or you mentioned and discussed earlier the implications of the New York governor's actions. How is that affecting the conversation, demand, the interest to pre-lease with your portfolio. Thanks.

This is Patrick Flurry. So, you know, we are a longtime power team, as you know. And so I think just maybe I'll kick it off and then Paul can clean up here. But we always try to frame for investors the power demand and power challenges, right, that the market is dealing with today. So if you step back and think about different power regions, as an example, the state of California is, on a standalone basis, the fifth largest economy in the world. It has an 85 gigawatt installed grid. The Texas market has a roughly 95 gigawatt installed grid and probably average demand of around 65 to 67 megawatts because it's a peak year market and the system has to be designed for the highest draw day. The backlog in Texas, as we all know, as an example, is now over 400 gigawatts and batch zero is roughly 60 gigawatts. So just, again, to frame that, you basically have to build another California in the Texas grid to meet all of the batch zero projects. Combined cycles are 500 megawatts each, roughly, and take three years on average to build. So you've got to build hundreds of combined cycles. So just I think it's important to kind of step back and frame that for folks, because that's how we look at and approach each market or utility partnership or otherwise that we are in. And it's power first, like is the transmission grid set up to accommodate our load? Is the local generating system set up to accommodate our load? Can we get front of meter generation expansion at our sites as opposed to behind the meter and work with the local utility partners, right, to increase our capacity over time, not by limiting our customers to behind the meter, you know, single or double point of failure, but connected to the grid that has thousands of points of failure, but also, you know, not being a parasite on the grid and providing additional generation and even backup, you know, power during times of grid duress. So I think that's our, in general, how we approach each of these sites, each of these markets from a power first position.

My remarks in the queue where you're in batch zero versus some of the batch, but we're all about attracted power. And that's how big could this go? I don't have an answer for you. The room we've ever had and with last credits. But I don't focus on that. I'm trying to focus on execution responses. As long as we do what we have contracted right, then the customers will continue to come. And that is why Anthropic is a multiple repeat customer. We have guided the markets to 250 to 500 megawatts because that's what we're built for at this time, and we have reaffirmed that. Can we do more? Maybe, with the right EPC contractor, somebody like Floor, with the right region where the labor is available, with the right mature and sophisticated regulatory framework and policy, absolutely. You know, that's why Lake Mariner and Cayuga, Lake Hawkeye, are worth so much more money today as a result of some of the things that Governor Hochul is talking about. But we're focused on execution. And as long as we could eat what we have on our plate, then we could ask for, you know, we could ask for more in the next round of service. In terms of dialogue, what's changed? For us, not a whole lot. We think about dialogue in these projects in two primary ways. One is with the community in the region that we're at. You know, we've always, because we are power folks, we've always developed power plants with a great level of sensitivity to the region, to the local community, and sensibility towards, you know, what the regulatory framework is. Likewise, we're talking to our customers about it. These customers are really, really smart. They know the difference between a Q position and a batch position versus a contract with an investment-grade credit to supply gig of power. That is where they are focused, and that's how they're prioritizing their time. So I think it's one reason why Muskie is seeing the kind of action it is in the data room today.

It's because people recognize when that project can come online and that it's a very credible project. um so we're excited about where the market is today and we look forward to continue to participate in its growth thank you this question comes from kim horan of oppenheimer please go ahead hey thanks guys a question on execution really um obviously the demand is incredibly strong and it's relative execution is a question but i mean where are you guys or the industry where are we more electricians and HAC tradesmen, you know, et cetera. And you have the cost kind of locked down for them, I guess, especially on the Entrapo contract. Do you have the construction contracts locked down at this point? And one of the reasons I mentioned, I mean, Elon Musk last night from SpaceX is, you know, talking about building up 10 gigawatts a year of capacity. I mean, how does the industry find the people to do this? And how do you compete against others looking for the same workers?

What we're excited about is in the Kentucky Project, their top quality, world-class EPC that we have a history with on the power side. And one of their, putting them down in contracts for the performance of EPC duties on site. So I think that's one driver. The second thing is experience in the trades, building power plants. So we just have a lot of experience in working with the right subs and contractors. risk averse here. We like to sleep at night. We like to lock down pricing so that we could get comfortable, at least because there wasn't, if you will, a reference design. So both we have that reference design now, so we could help our subs the project and therefore get them to take more risk with us and give us a fixed price contract.

Thank you. Naz, did you want to add something.

Sure.

And just, this is another here, just to add to what Paul said, and this gets back a little bit to the guidance that we have around the 250 to 500 per year, you know, to the extent that we want, you know, the demand is there and we want it to do, you know, significantly more than that. Finding those folks, as you correctly point out, is a challenge. And so, as Paul mentioned, you know, working with the floors of the world, working, building off the relationships that we have, both, you know, in jurisdictions that we're operating in, but also kind of properly sizing the opportunity is critical to the execution. And that feeds into the discussions with the tenants and customers that we have as well. As you noted, kind of the relative execution of what matters, if you have the power, you have the site, but also the follow through on being able to point to both, you know, the procurement of the equipment, as well as a procurement of the labor required to support these projects is critical, and again, therefore, there is some bound that we have to work within as we think about, you know, kind of our guidance as well, and that's, you know, part of the reason we have this 250 to 500 per year that we've been guiding towards.

The next question comes from Mike Grandolph of Northland.

Please go ahead.

Hey, morning, guys.

This is Logan on for Mike. Thanks for taking our question. First, and kind of building off an earlier question, can you provide some additional insight into the demand and discussions for the now potential two gigawatt muskie site relative to Haasville. And then second for Patrick, can you touch on how we should think about financing that Thank you.

Hey, Logan, it's Nazar here. The discussions are pretty robust. We are engaged with all of the usual suspects with respect to that capacity. they are interested in not just kind of the initial tranche, but, you know, the total site over time as well. We're working through with them the iterations on hardware and design and deployment, given that this could be kind of a multi-year process for the full site as well. And so we're deep in that. We are working through that heavily as we speak. And so I think, as Paul mentioned earlier, demand remains very strong. That 28 power, you know, we think is becoming more and more kind of what's left on the table. You know, most of that 27 capacity is either sold or pretty close to being sold. And so therefore, you know, there is a heavy emphasis on 28 and we're finding, you know, a very strong demand. And, again, all of the usual suspects are working hard with us and they're working on that site.

Yeah, and then this is Patrick. Yeah, regarding the second question, look, I think you'll see us follow, you know, the model that, you know, we opened up the markets to last October, which is, you know, something that kind of looks like project financing that can be a bond that's amortizing or a term loan. I think our approach there is very different than the rest of the market, and that is on purpose. So our projects are not levered 95% or 100%. They are conservatively levered with a healthy equity layer. As I mentioned in my remarks, the Wolf Compute project was 75-25 debt equity. It's now being equitized even more, closer to 68, 32. So again, I think for the debt markets to continue to take all this paper, you really have to distinguish yourselves. And I think our approach is that, you know, we are not levered to the eyeballs like a lot of our peers. We have conservative leverage and we generate very significant amount of deleveraging and amortization during the period, and that is something I think you'll continue to see us do at the Haasville site, and you'll continue to see us follow through on that at Muskie as well. And again, I do think importantly, as I mentioned in my remarks, we have a flush balance sheet. We have enough liquidity to do pretty much almost everything that's in our near-term order book today without returning to the equity capital markets. So, you know, we will be back in the debt capital markets, you know, to finance Hawesville. And then I expect, you know, likely sometime probably first half of next year for Muskie.

Thank you, guys. Congrats on the quarter.

Next question comes from Stephen Glegola of KBW.

Please go ahead.

Hi, thanks for the question. Paul, can you provide any more color on the three to five sites currently in active pursuit and final due diligence, particularly around power capacity under evaluation, geography, and maybe energization timing as well. And then, Patrick, could you just provide any updates on where you stand with securing credit support on the Anthropic lease at Hawesville and who that counterparty is? Thank you.

Yeah. Hey, this is Patrick. Stephen, I'll take the last one. You know, I would just reiterate what we've said in that the Hawesville lease will be, you know, supported by an investment-grade credit. The fortunate position we are in, right, is we went to the market, did a large equity financing in April. We just sold the JV. You know, we have a billion and a half of cash on balance sheet today. That's plenty of runway. You know, we don't need to rush to the market. And that was done on purpose, as we've talked about, because, you know, each time we had announced a deal in 2025, we had to run to the market to finance it right away. So here, right, we went front foot forward, playing offense. We have all that cash on our balance sheet. We don't need to run to the markets anytime soon, so we're going to prepare, and then we'll go when we're ready to go and when we think the markets are open to it. So that's our approach. I don't know if you want, Paul, you want to...

In terms of the pipeline, you know what we actively are developing, and I guess your question is with respect to, in slide 16, the phase four, the three to five pursued sites. If that's the case, you should know that, you know, the same principle of regional diversity is driving those discussions. I'm actively led by Kara Lenglis, which looks at data center development. We've had a number of countries outside of the U.S. We think that we have the skill set data center for customers that want to move to some of the better. about that, we'll let you know, but we are talking real time to potential customers for that facility. We like as well, we like the Midwest quite a bit, Southeast quite a bit. So we're looking at sites, talking to our customers, asking, you know, what their needs are, where they think they'd want to be. But again, for us, it's all about available power and our ability to quickly contract that power. You know, the whole process of development isn't one where you sort of pick a site and you say, let's think about, let's go there, and you spend a lot of money. It's a tremendous diligence effort that includes talking to the local community, talking to the political leadership, and speaking to customers about their relative interest in it before we sort of go further down the road. So that's sort of what we do, and the opportunity set is pretty significant. I think, by the way, as a result of what's happening in Texas and in New York, there's a lot of projects, and everywhere else, by the way, a lot of projects are going to fall away because they're not going to be credible or they won't have the...

Thank you.

The next question comes from Chris Brendler of Rosenbach Security.

Hey, thanks for your question and congrats on the results here. I was just going to ask on the FluidStack lease modifications, I wasn't quite sure what drove the changes, I feel like it's coming from the client, but was it increased costs that you were running into or was it just modifications of design that caused those changes and the increase in equity. Did that sound like that did not fall out of these changes? It was actually intentional to increase the equity, assuming to make the project more palatable for debt investors. Just wanted to get clarification there. Thanks.

Yeah. Hey, Trist, it's Patrick. I'll address that. So as we mentioned, these projects are complex and the designs are evolving. As you know, we came up, and I tip my hat to our operations team that worked with FluidStack, Google, and the customers, we came up with the reference national design that has been rolled out to other folks at our site at Lake Mariner last summer. That design has changed over time, particularly as our clients get more experience running the hardware. And so, as Paul mentioned, it is a true partnership with them on site, And there's a constant dialogue of, hey, can we tweak this or that? And so many of those are design changes or what's called tenant fit-out, right? So to give you an idea, at CB3, I think we had about 43 tenant fit-out requests that were design changes, and each of those has a cost impact and has a schedule impact. So there's an active dialogue around all of those that candidly ripples through the entire ecosystem, Not just, you know, Terra Wolf's project. And so those, what you're hearing from us is those impacts were about $150 million at Lake Mariner that, you know, Terra Wolf, you know, in a series of negotiations agreed to fund that is being recovered, you know, over the 10-year lease term. That recovery just for those items, you know, is over $300 million of rent. So we're effectively receiving, you know, a mid-teens return in line with the yield on cost on the lease on those items. As you point out, we very easily could have debt financed those. We specifically chose not to. The resulting impact is, again, if you take those changes along with the move from 162 to 168 critical megawatts, it's over $500 million of additional revenue over the initial lease term. That is extremely powerful from a debt deleveraging perspective. So not only are we adding additional equity layer into the project, but, you know, the amortization and deleveraging profile of the project and cash flow profile of the project, you know, has significantly increased. So, again, I think that's a different approach that our team is taking as opposed, you know, I have a saying internally, just because you can doesn't mean you should. You know, leverage is great, but I think we want to be very balanced with it, particularly as, you know, we build and operate, you know, brand new projects.

That's fantastic, Cora. Thanks so much for that. One quick follow-up. I mean, not quick, but we've seen a governor take action in both New York and Texas now. Very recently, very rapid sort of change in political tone here in those states. How do you feel about the political situation in West Virginia and Maryland at this point, or in Kentucky? Thanks.

Yeah. You know, I don't I don't think we've seen anything that we should be surprised about. You know, we have stated all along that ultimately, you know, listen, data centers are very, very important, but it's also important that they're done right. And so I think everyone's sort of getting there. And that's why in my remarks, I said, I'd rather we don't want to pretend that that's not going to happen. and we're quite confident it's going to happen, and therefore we develop our projects so we could be in front of that and proactive and be able to affirm to the regulators and the political leadership and the local communities that we are the responsible, credible folks. Listen, you will always have people who can be particularly loud, who don't want, you know, progress, who don't want power plants, who don't want data centers, power and data. I think into an industrial site, existing power facility down from a much larger coal facility, that's a benefit to the state. Maryland is desperately short power, so will be a surplus generator to the grid. That's a tremendous benefit to the state. And we have a close relationship with both the local community and the leadership in the state to enable us to move ahead there, and we're very excited about it. Maryland also happens to be one of the most important from a value in terms of data center use, particularly that Washington, D.C. corridor. So I think Maryland, we feel great about it. Kentucky, I mean, it's like winning the lottery to work with Governor Beshear and his team in Kentucky. We have never felt so welcome as we do in the local communities. Again, this is brownfield sites that we are bringing jobs. We're cleaning them up. We're generating in Virginia. We like it a lot. We think, again, they can create an opportunity in business environment where we can do a win-win. So, as I mentioned when we talked about development, the regulatory framework, the political horizons, you know, these are all things that we contemplate. And remember, we're building power in data centers that are going to be, you know, be around for 20 to 30 years. So we try not to worry too much about moment-to-moment areas of people exercising their voices, sometimes in the most aggressive ways, and we think about what does the state and local community want and need and how could we be responsive to it and create a win-win for everyone. And we have not been deterred in any of our sites that are, you know, currently active or in the pipeline in any real material way.

Great. Thanks so much for all that color. I appreciate it, Paul.

Our last question comes from Michael Funk of Bank of America. Please go ahead.

Yeah, thank you for fitting me in. Maybe just quickly, you know, you touched a few times on some of the constraints with labor, particularly electrical labor, you know, also highlighted estimates for cost per megawatt. So, just wondering what protections do you have in your contracts for rising costs and then, you know, maybe how those costs are impacting development yields or returns projected. Love to hear any comments there.

Sure. This is another here.

Sure.

So when we are in the middle of negotiating a lease, as we just did with Anthropic for the justified site, on the front end, the two large components of cost are really the labor component and then the second is the equipment component. So on the equipment side, usually we have these 12-month rolling forecasts with our various vendors. And so we've got a pretty good sense of where those costs are. And so those costs from an equipment perspective when we're signing up that lease are usually we've got deposits down and have firmed up those prices or we're about to. And so we've got decent visibility with respect to the equipment side of things. On the labor side, there's, I'd say, kind of the two levers there are just, you know, the number of labor hours required to complete the job and then the cost per hour of that labor. What we've been seeing is, you know, on a cost per hour basis, you know, that's been generally moving up. And so as more and more projects are moving forward, the scale is increasing. The per hour cost of that has been creeping up. And so it's difficult to kind of pin that down exactly, especially for a construction cycle that's, you know, 12 to 15 months long. What we do is working with Floor and other vendors that we have is we try to put some parameters around that and awarding it to subcontractors and kind of locking in some sort of range with respect to that price. And then finally, just on the number of hours that are required, as we deliver more and more projects, particularly for customers that have a similar design or are using the same hardware, our ability to kind of map out the specific number of hours that are needed gets tighter over time as well. So, you know, the yield that we've been targeting have kind of been in that mid-teens range. If you looked at what we've done with Anthropic and FluidStack prior to that, we've been in that range. We've been able to maintain that. We've likely been able to kind of have some pricing benefit on our side, you know, with each successive contract as well. And again, from a cost management perspective and the equipment, you know, we usually have a pretty good handle on when we sign that agreement. And with labor, we've got some balance around it. But again, as we mentioned earlier, the challenge that we have on the labor piece is just that per hour labor cost. Again, we've got a view on what that creep could look like. But that's where I think, you know, we have the most work to do. So it's not a perfect science, but, you know, working with Florida and others gives us a chance to kind of control that.

That was a great follow-up. Thank you very much. And this is Patrick. Let me just address the yield question, because that's the right one. But as I mentioned earlier, the most important part is getting an adequate return on your capital. And so, as I mentioned, the changes that we have processed are generating over $500 million of revenue over the lease term. So we are recovering the incremental cost. I think that is the very important point, right? And as Nazar just mentioned, you know, we are very open with our customers that we need a mid-teens return. That is simply because if your WAC is not below your yield on cost, by definition, there is no equity value. So if you take the way we finance projects, call it at roughly 80-20, just to make math simple, if your debt costs 6.5%, that's five points of whack. If your equity costs 25%, that's another five points of whack. So your whack is 10% in that example. So for us to sign a deal that is accretive to our equity, the yield on cost has to be greater than the WAC. So I've sort of seen some folks in our market signing deals that appear where their WAC is actually in excess of the yield they're earning on the lease. That doesn't work. That's kind of called real estate where you buy something and you pray and hope that in 10 or 20 years, it's worth more. That's not the game we're in. We are creating tangible, real equity value for our shareholders day one.

That was all very clear and helpful. Thank you, guys.

That concludes our question and answer session. The conference has now also concluded. Thank you for attending today's presentation, and you may now disconnect.