Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the CleanSpark Investor update call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, simply press star then the number one on your telephone keypad. If you'd like to withdraw your question, again, press star one. Thank you. I would now like to turn the conference over to Harry Sudock, Chief Business Officer. Please go ahead.
Thanks, Krista. Good morning, and thank you for joining us as we announce the next step in the evolution of our business model as a market leading data center developer. I'm joined on the call today by our Chief Executive Officer and Chairman, Matt Schultz, Chief Financial Officer and President, Gary Vecchiarelli, and other members of the management team. Before we begin, I want to remind everyone that some of the statements we make today will be forward-looking, based on our best view of the world and our business as we see them today. The statements and information provided will remain subject to the risk factors disclosed in our 10-K. With that, I'll turn it over to Matt.
Thank you, Harry. This morning we announced the signing of a 20-year triple net lease agreement directly with a high investment grade global technology company that will transform our 250-MW facility in Sandersville, Georgia, into our first high-performance compute data center. Site preparations have been underway for several months to ensure that we hit the ground running for an efficient start to construction. This announcement has been eagerly anticipated, not only by our shareholders, but also by our dedicated team and advisors whose hard work and commitment made it possible. I want to thank them for their tireless efforts and exceptional execution throughout this process. Their dedication has been instrumental in reaching this milestone, and I couldn't be more excited to continue building that momentum as we expand our presence in the AI and HPC space.
As I mentioned, this is a triple net lease direct with a high investment grade global technology company. This 20-year agreement has a total contract value of approximately $6.6 billion and covers the entirety of our Sandersville site with nearly 250 MW of gross capacity and 175 MW of critical IT load. Throughout the course of our negotiations, we agreed with our counterparty to align the scope of this project with their preferred MEP manufacturer and general contractor for this project. We believe that leveraging their experience, supply chain network, and overall track record best positions us to execute the build-out in a timely manner. The initial data hall is expected to be ready for service in the fourth quarter of 2027, with the remaining data halls ramping steadily into early 2028.
As we have mentioned before, we have structured this deal to allow CleanSpark to continue mining Bitcoin at the site until the very moment we cut power over to the new data center facility. Finally, in conjunction with the lease at Sandersville, we have also entered into exclusivity with the same counterparty regarding our Texas assets in Sealy and Brazoria. I want to be clear that we are in an exclusivity window, not at a finish line, but I can tell you that the scope of this conversation reflects the portfolio dynamics we described on our last earnings call and is reflective of the confidence and durability we have at the outset of this multi-decade relationship.
Before Gary joins us in a moment to address how this deal will impact our operations and how our commitment to capital stewardship has put us in an advantageous position to finance the project, I want to take some time to address how we see the current marketplace. First, the sheer scale of compute demand is breathtaking. We had a conversation recently with a neocloud operator who said they were seeking 8 GW of capacity, the equivalent of eight large nuclear power plants. Companies are not shopping for a single data hall. They demand diversity of geography, a mix of low latency and large scale deployments, and a developer they can trust in order to build a multi-decade relationship. Next, this is underappreciated. It's the scarcity of what we have, grid-connected power at scale with the land to support a full AI campus build.
Sandersville is the natural anchor for our conversations because all 250 MW are currently energized and live. We closed on an additional 122 acres earlier this year. We've been working on the land in preparation for this announcement. We understand the engineering requirements and basis of design this tenant needs. We have, I want to be clear about this, an exemplary community and utility relationship with Washington County that sets us up ideally for large scale infrastructure development. We're seeing this develop in an ultra-competitive leasing market with strengthening economics and commercial terms over time, accompanied by rapidly improving financing terms and optionality. As it pertains to Sandersville, we're fortunate to combine current market dynamics with a long-term partner that has confidence in our ability to execute and arrive at a lease that offers tremendous value for all parties.
Total contract revenue of the 20-year base lease agreement will result in approximately $6.6 billion. Considering the triple-net structure, we're expecting approximately $330 million of average annual NOI. Additionally, there are two five-year extension options as part of this contract that, if exercised, would result in a lease term of 30 years with a total contract value of approximately $11.6 billion. Finally, we project our cost per critical IT megawatt to be approximately $10 million-$12 million in line with market CapEx for this generation of data center. Let me give you some context on how we got here. Four years ago, we expanded our position in Georgia with the acquisition of Sandersville for just over $40 million. At the time, we were purchasing 80 MW of power and Bitcoin miners that were operating.
In the past two years, we completed three separate power expansions of 20 MW, 50 MW, and 100 MW to bring our total capacity to the level it sits at today at 250 MW. This represents a 3x increase in contracted power, making this campus ideal for our first HPC development. None of this would be possible without the relationship-driven, boots-on-the-ground mentality with which we've always operated. I've said many times before that at the heart of everything we've done in Sandersville is a commitment to win-win outcomes. That same principle has guided these negotiations. It's a win for our tenant, who gets a high-quality, creditworthy infrastructure partner with a proven track record of community-embedded execution. It's a win for the communities in Georgia and potentially Texas, who get long-duration jobs, tax-based expansion, and a partner that shows up, not just for the ribbon cutting, but every single day.
It's a win for our shareholders, who have supported the strategic, disciplined approach that made this moment possible. We look forward to updating you on our progress as this project advances. With that, I'll turn the call over to Gary.
Thank you, Matt. Good afternoon on what is a transformational day for our company and stakeholders. For those of you who have followed the CleanSpark story for a number of years, you have witnessed us evolve from an expert in energy management and microgrid capabilities to the largest pure-play Bitcoin miner in North America, and now to a large-scale AI data center developer. The foundation of our expertise is the acquisition and efficient monetization of land and power. As of today, we have 1.8 GW of contracted power. We also have a high degree of confidence of that increasing to 2.1 GW through the ERCOT review process, and well beyond that through our continued acquisition and development efforts. Matt discussed the evolution of growth of Sandersville from the time of acquisition to the present, but what I believe is as important is the successful growth of our overall portfolio.
In the last two years, our portfolio has increased 4x. We have grown from 500 MW to a 2+ GW portfolio with an increasing share of AI-suitable capacity across both our distributed sites and newer, larger locations. This fiscal year alone, we closed on acquisitions of nearly 900 MW through the acquisitions in Sealy and Brazoria. These assets have rapidly progressed in leasing discussions and are on the verge of unlocking significant additional shareholder value. When you look at our development platform, you can see the opportunity ahead of us. Between Sealy and Brazoria, we are building an infrastructure hub in Greater Houston. These are purpose-built AI campus opportunities in one of the most sophisticated power markets in the country. Importantly, we came into that market with the relationships and track record to move quickly.
As Matt discussed, what we're presenting to this counterparty in this exclusive window is not a single site. It's a platform. Sandersville offers something you can't replicate, a fully energized, community-embedded, shovel-ready campus and utility structure that protects both the tenant and the broader community. The Texas assets offer scale, ERCOT's market sophistication, and the ability to grow alongside a tenant across several phases and multiple decades of deployment. Together, they answer the central question every major compute buyer wrestles with: How do I get enough of the right capacity at the right place at the right time where it can actually get built? Before opening the call to Q&A, I want to touch on our financial position, what we're seeing in the capital markets, and our plans around Sandersville in particular.
As of June 30th, we had a cash balance of approximately $200 million, a HODL balance of nearly 14,000 Bitcoin, or approximately $900 million in value, and an undrawn $400 million Bitcoin-backed revolver. Similar to the commercial terms of the lease, there's a well-defined playbook when it comes to financing a data center build-out. Recent deals have consisted of a combination of high-yield and investment-grade construction financing and cash or equity to complete the capital stack. We've seen terms become more favorable over the past few quarters, with loan-to-cost ratios increasing and interest rates decreasing. Both of these trends have a strong correlation to the credit quality of the tenant, a critical aspect of our go-to-market strategy. Recent project debt financing transactions in the space have been as much as 6 x oversubscribed, indicating significant interest and availability of capital.
In the current market environment, this lease delivers an excellent outcome for our shareholders as we expect to finance the overwhelming majority of this build-out with project-based financing. For the Sandersville build-out, we expect cash CapEx costs to be in the range of $10 million-$12 million per critical IT megawatt. The debt markets are of sufficient size and scale to support this build at a favorable cost of capital. As Matt mentioned, our lease will generate $6.6 billion of revenue over a 20-year period. It's also important to reiterate that this is a triple-net lease, so there are expected to be very little direct costs and net operating income margins should be close to 100%. We expect the lease to generate an average NOI of approximately $330 million per year.
Additionally, there are two five-year extensions which add another $5 billion, bringing the total lease value over a 30-year term to approximately $11.6 billion. With respect to any equity portion of the project we will need to fund, we have optionality. Now, optionality is a word you have heard CleanSpark use many times as we've built this company and business model on having the ability to select the best option at any given time. That's the case here as we have a wide range of financing options on the table. In addition to optionality, we pride ourselves on being disciplined allocators of capital. We have not raised capital via issuance of stock in over 20 months as we closed out the last ATM in November of 2024. We have repurchased more than $600 million of our own shares, demonstrating our confidence in our long-term view.
Our capital strategy will be to continue minimizing the issuance of equity as we believe our stock is our highest cost of capital currently. With other sites in our portfolio under exclusivity and the highly marketable and valuable nature of those locations, we believe we are on track to significantly grow shareholder value. I also want to point out that with a direct lease and a high investment-grade tenant, we have intentionally avoided using credit wrappers, which in our view, keeps our cost of capital low. The structuring of this transaction further substantiates our disciplined capital strategy. Our announcement today is no accident. It is the result of a business strategy underwritten by discipline and capital stewardship. Our next phase will require more of the same, and we look forward to providing consistent updates along the way.
With that, I'll hand it back to Harry to lead us into Q&A.
Thanks, Gary. We'll now open the floor to questions from the analyst community. Operator, please provide instructions and manage the queue for the Q&A session.
Thank you. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you'd like to withdraw your question, again, press star one. We also ask that you limit yourself to one question and one follow-up. For any additional questions, please re-queue. Your first question comes from Greg Lewis with BTIG. Please go ahead.
Hi, thank you, and good morning, and congratulations on today's announcement, gentlemen. Matt or Gary, I was hoping you could talk a little bit more about the contract and really, you laid out the details around Sandersville pretty clearly. I guess a couple of questions we just had was, obviously the company has some other attractive sites in and around the Atlanta, Georgia area. I'm kind of curious, did those come up in the negotiation? Also, as we think about the opportunity in Texas with the LOI, how should we think about realizing it's still in negotiation? Is there a timeline on the LOI? How should we be maybe thinking about the nuance around adding incremental power, getting that approved? Just kind of curious if you could start there.
Hey, Greg. Great to hear from you, and thanks for the question. You've been around our story for a long time, going all the way back to the early days of Bitcoin mining, we had talked about infrastructure first and focusing on win-win relationships and land and power acquisition and getting that certainty. This is no different. We ran a process. There was a tremendous amount of interest across our portfolio. The reason that we selected the tenant was it was the best opportunity for them and the best opportunity for the company. Being a high investment-grade counterparty enables us access to the best type of financing.
We have continued to have interest across a multitude of our sites, as a number of these potential tenants were accessing our VDR to kind of understand what we had available, the request was made to tie these up as well with the intent to move quickly because there is high demand for compute. With regard to the terms of the LOI, the length of the LOI, we haven't disclosed that, we will certainly update as the lease process progresses.
Super helpful. Thank you very much.
Your next question comes from the line of Paul Golding with Macquarie Capital. Please go ahead.
Thanks so much and congrats on the lease and the LOI. I wanted to ask just on terms for the executed lease, is there any color you could give on the penalty structure or any delays, just supply chain-related or otherwise, how the lease is structured in terms of any delays around timing that you might face for just market reasons? A follow-up to that is on the Texas LOI and exclusivity, just whether there were any pricing details or terms included in those executed documents, even though it's not a firm lease. Thanks so much.
Hey, appreciate it. I think the best way to talk about this is we believe that there are some very solid second-mover advantages. We've seen some of the risk profiles that exist in the market in other leases, and we've spent, I would say, an equal amount of time mitigating risk that we did considering upside to make sure that we can execute as advertised. I think, in my prepared comments, I mentioned that we're using the preferred EPCM and GC of our tenant. There's familiarity there with the basis of design and construction process. We feel very comfortable about that. Regarding the Texas site, we haven't disclosed any more detail than what you see today. We're very comfortable in the energization process with ERCOT.
We've talked about that in the past when we closed on both of these projects. We'll certainly update the market as that advances.
Great. Thanks so much, Matt.
Thanks, Paul.
Your next question comes from the line of Mike Grondahl with Northland Securities. Please go ahead.
Hey, guys. Thanks and congratulations. Matt, is there a standard exclusivity period out there we should be thinking about just in the industry, like 100 days, 120 days?
It's a great question, Mike. We've seen exclusivity periods that range from 30-120 days. I don't know that there would necessarily be a standard. Again, we haven't disclosed what this period is, but I can tell you that having the same counterparty on this Sandersville lease, there's a great deal of familiarity with where are the hot button issues? What are they looking to accomplish? How can we assist them in mitigating risk and ensure that we deploy the project on time and on budget? We're confident that they've had the opportunity to understand the way our team works, the way Leighton and his team have handled the legal negotiation in advancing this, and they've developed a great deal. I believe they've developed a great deal of comfort with us. We feel that the exclusivity period is reasonable in market.
Got it. In your prepared remarks, Matt, you said something along the lines of the tenant's preferred manufacturers or vendors. Could you just explain that in a little bit more detail? Does that kind of mean the tenant has been selected, the people they want sort of constructing this? Just help us understand that better.
Sure. With an investment-grade counterparty like we have, obviously this isn't their first bite of the apple. As we began negotiations and started contemplating the EPCM GC partner that we'd have, our tenant actually made a suggestion that they were comfortable with and familiar with this GC. We took that under advisement and began a very robust dialogue and negotiation with this builder to include negotiations and certainty on the basis of design in both Texas properties as well.
Got it. They kind of pointed you in the direction of a GC. Do you think that was a difference maker here in the negotiations?
Absolutely. What we hear are horror stories about projects running over time and over budget and trying to design and deploy a bespoke data center. The familiarity with this particular group, especially since they're a manufacturer of some of the MEP components, it really helps to short-circuit some of that long lead item and supply chain risk. Since they have familiarity with our tenant, obviously it was a command performance, and they suggested we take a look at it, and we had a high level of comfort once we got to know them and their team.
Great. Hey, congrats again. Thanks, guys.
Thank you.
Your next question comes from the line of Mike Colonnese with H.C. Wainwright. Please go ahead.
Hi, guys. Congratulations on the deal. Really great to see you here. Thank you for taking my questions. Matt, first one for me. You touched on this a bit in your prepared remarks earlier. I was hoping you could provide a bit more detail on the expected deployment timeline for the 175 MW, really what that first tranche of power delivery looks like for 4Q 2027. We should think about the subsequent ramp from there.
Yeah. I appreciate it, Mike. I think to maybe clarify your question, power ramp isn't an issue because the substations built were already operating. We did buy 122 acres adjacent. We're going to be transferring that power over. The way the agreement works is the first data hall is contemplated to be RFS in Q4 2027, with the remaining data halls to be completed in Q1 2028.
Got it. Thanks for that, Matt. If you could talk about your level of visibility into securing necessary equipment to complete the build-out. Sounds like you're working with some of the preferred partners of your tenant here. Just curious as to how you're thinking about procuring and securing some of that long lead time equipment for the build-out.
Yeah. That was obviously a big consideration. Mike, we've seen horror stories throughout the industry of over-commitments and inability to perform over budget, over time, et cetera. Since our tenant has familiarity and has deployed with their EPCM before, they are comfortable with the fact that they do a significant amount of manufacturing of the mechanical, electrical, and plumbing components here in the U.S. There's some certainty on execution and delivery. Plus, the fact that they've got a good track record with our tenant gives them that certainty. We took that as a very strong reference and engaged in lengthy discussions with their team, visited their facilities. I can share with you that we expect to be a partner with these guys.
Our teams will be on site with their teams on a regular basis, ensuring that we have line of sight on the project and giving us certainty that we can deploy according to the terms of the lease.
Very helpful color, Matt. Appreciate that. All the best with the build-out of Sandersville.
Thanks, Mike.
Your next question comes from the line of John Todaro with Needham & Company. Please go ahead.
Hey, guys. Thanks for taking my question, and congrats on a great lease. Matt, you guys have referenced an IG counterparty going back to maybe even early 2026. Is this the same counterparty that's been talked about for some time, or was this kind of a new counterparty that came up maybe more recently that ultimately signed?
It's been a fun process, actually. We've spoken with neoclouds. We've spoken with hyperscalers. We had discussions that began in earnest with the tenant that we selected. We didn't necessarily go straight to marriage. We had a number of other parties in the data room as we were kind of figuring out what the transaction might look like. I can tell you that we've been in meaningful discussions with this counterparty for a period of time. I think they developed a level of confidence in our ability just from the interaction with our team, and that really is what resulted in this being more of a portfolio play than just a single site.
Got it. Understood. That's helpful. Just one more maybe follow-up on the other additional sites. I know the terms aren't negotiated yet, would you guys prefer triple-net and kind of the similar type deal that you did with Sandersville? Is that kind of the preference?
Yeah. I would say that we see a triple-net lease as kind of the gold standard initially on a real estate play. When you have an investment-grade counterparty, it gives that certainty on cash flows and risk mitigation to our shareholders. We believe that this provides the greatest impact and value for our shareholders while being very conscious of risk going forward.
Got it. Understood. Thanks again, and congrats.
Thank you.
Your next question comes from the line of Henry Hearle with B. Riley Securities. Please go ahead.
Thank you, operator. Matt, Gary, Harry, congrats on this deal. I guess to start off, could you help us with the annual lease escalator? Would 3% be in the right ballpark, or just what's your messaging around that?
Yeah. I would say that the escalator is standard for the industry. We haven't disclosed those terms, but I would say that the escalator on this would be market.
Got it. Then on Texas, would the counterparty be able to take down just Sealy or Brazoria, or would they have to take down both in order to satisfy that exclusivity agreement?
Yeah. I think that the exclusivity agreement applies to both. At the end of the day, I think the negotiations are ongoing. Without intentionally being vague, I think that it comes down to the result of the due diligence and what gives them comfort for what their needs are across their portfolio.
Got it. Congrats again, guys, and continued best of luck.
Thank you.
Your next question comes from the line of Jim McIlree with Chardan Capital. Please go ahead.
Thank you. Good morning, congratulations. When you look at Sandersville versus the Texas facilities, is there something about Sandersville that makes it more, less, or equally attractive to Texas from a lease term perspective?
I appreciate the question. ERCOT is a sophisticated power market. There's a tremendous amount of opportunity in Texas. I think Sandersville is very unique in the fact that we have such community support there. We've all seen the news stories about, I think it was $26.5 billion worth of data centers that were mothballed on the development plans because of lack of community support. We've done, I think, a tremendous effort and a really solid job of working with the communities in which we operate. I think the fact that it's energized today, the substation is built. I had dinner with the mayor of Sandersville last Thursday night, kind of talking about where this process is going, I can tell you that as a community, they're enthusiastic and excited for what this means to their community.
In fact, he had a quote in our press release that t hey appreciated CleanSpark in recognizing what makes their part of the world special. Sandersville is a gem. All of our Georgia sites are fantastic. We've gotten great community support, and we're starting to see the same in Texas. We started out with putting in the legwork and working with the community, understanding what their needs are, as well as making sure that these sites fit within the ERCOT process, that we have certainty on batch zero, we have certainty on energization. We feel really good about both of these, and I think that's why the counterparty pulled the trigger on this transaction.
Great. That's very helpful. Thank you.
Your next question comes from the line of Bill Papanastasiou with Chardan. Please go ahead.
Good morning, gentlemen. Congratulations on the news and the ongoing AI HPC transition. Just a quick one from me, and apologies if this was discussed, I got disconnected earlier. Can we talk about the project-level financing plans for Sandersville and the future sites? Company clearly is holding a lot of liquidity on the balance sheet. What are the plans there and for potential raises down the road? Thank you.
Hey, Bill. Good to hear from you. Thanks for the question. In my prepared remarks, we talked about optionality, right? This is the same optionality we've been talking about really for the past couple of years on how we like to position ourselves to take advantage of the best option at the market at any given time. I think for financing this transaction, we definitely will be tapping the debt markets with products that trail has already been blazed by some of our peers. High yield bond market being one of them, potentially traditional construction real estate loans from large banks is in the mix as well. Any way you look at it, our strategy is to essentially this is a real estate deal at the end of the day, right?
In a real estate deal, if you have a high credit grade quality tenant, use the lease cash flows on a monthly basis to help service the debt. The higher your loan-to-cost percentage is, the higher your internal rate of return is. We're going to balance the loan-to-cost percentage with how much equity we would like to bring to the deal based on the terms at that time. Ultimately, for this project-based financing, I think that you're going to see us apply some debt at some very reasonable rates, in fact, much more attractive rates than we ever saw in the Bitcoin mining business. We're going to be very conscious of making sure that we have significant liquidity on the balance sheet while being mindful of dilution.
Appreciate it, and congrats again. Thank you.
Again, if you would like to ask a question, please press star one on your telephone keypad. Your next question comes from the line of Matthew Galinko with Maxim Group. Please go ahead.
Hey. Thanks for taking my questions. I guess as the first one, can you maybe highlight milestones and maybe what we should be looking for as you progress towards the build-out and target financing? When should we be hearing about any milestones?
Hey, Matthew. Thank you for the question. I think this is really critical to the way that we've designed our practice internally writ large, which is that we're incredibly execution-focused in every phase of the project. That was part of our thinking when we executed against the 122-acre additional parcel to make sure that we had a smooth pathway to build on a greenfield basis rather than any of the complexity on the Bitcoin mining parcel that's a stone's throw down the road. We really designed this entire project from the ground up to be streamlined across the delivery window. It was part of the selection of the partners that are going to be responsible alongside us for execution on both the design build and MEP procurement basis.
It's also part of the type of process and project controls that we've built out and wrapped around the project more generally. Ultimately, when we think about our execution muscle on a post-lease basis, it's about cost control and it's about timeline control and maintaining that at our central nervous system internally as we spider web out across the different trades and across the different phases of the project. It's also a function of what we disclosed in the prepared remarks as well when we discuss having an initial data hall delivery and then a very regular ramp into the following year as we go through each phase of delivery.
We're going to be doing a tremendous amount of the campus-level preparatory work to be ready for the phase data hall delivery that you're going to start to see, where we estimate that to be in Q4 of 2027.
Got it. Thank you. As my follow-up, I'm hoping maybe you could touch on that optionality perspective as you look to maybe redeploy the Bitcoin miners from Sandersville in the 4Q 2027 timeline. You'd be pretty close to the halving. I assume you'll just sort of evaluate what your opportunities are at that point, or how do you sort of expect to fit that reallocation into your model? Thanks.
Yeah. I think your point is incredibly well taken. The way that we think about our Bitcoin mining expertise in a digital infrastructure platform development world is that our Bitcoin mining capability is a power acquisition tool for us. When we see a power market where speed to power is a differentiator for the utility, we have a tool in our tool belt to bring a paid power bill online much faster than any traditional data center developer would've had. That operates independent of Bitcoin mining economics because ultimately the acquisition of power is one of the most valuable activities we can engage in as a business. When you think about the ultimate platform deployment approach here, we want to continue to add powered land to our portfolio.
We have an enormous and robust pipeline that we're really excited to continue to progress because we're not stopping at 2.1 GW by any stretch of the imagination, and we view our Bitcoin mining expertise as one of the ways in which we expand the powered land portfolio.
Great. Thanks. Congrats.
Thanks, Matthew.
Ladies and gentlemen, that does conclude our question and answer session. That does conclude today's call. Thank you all for your participation. You may now disconnect.