RIOT Q4 2024: Preps 100s MW for AI/HPC Demand, Seeks Low Cost Funding
- Strong AI/HPC Demand Opportunity: Riot’s Q&A highlighted that its power assets are exceptionally positioned to capture the rapidly growing AI/HPC demand—with hundreds of megawatts already available and plans to expand further—addressing a market where hyperscalers require near-term large-scale power amid transmission constraints.
- Minimizing Dilution to Enhance Bitcoin Yield: Management emphasized a focus on minimizing dilution through alternative, low-cost financing strategies that support high Bitcoin yield, leveraging inherently low production costs to boost shareholder value.
- Flexibility in Monetizing Assets: Riot is open to a variety of deal structures—including outright asset sales, leasing, or developing powered data center shells—which could unlock additional value from its diversified energy asset portfolio.
- Uncertainty in optimal asset utilization: The discussion of multiple deal structures (leasing land, providing a powered shell, building a complete data center, or outright asset sale) suggests uncertainty around the best way to monetize their power assets, which could signal challenges in maximizing long-term value.
- Reliance on external advisers: Engaging Evercore and Northland to facilitate market penetration indicates a dependency on third-party financial advisers. This reliance could complicate or delay deal execution, potentially leading to less favorable sales terms.
- Potential undervaluation risk: The openness to outright asset sales and the broad range of potential deal structures may expose the company to deals that undervalue its assets, which might negatively impact long-term shareholder value.
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Business Complement
Q: How do Bitcoin and HPC complement each other?
A: Management explained that Bitcoin is the reactor that built their strong balance sheet, enabling them to invest in HPC data centers using their energy assets, thereby diversifying revenue. -
Margin Outlook
Q: When will margins align with industry?
A: They expect margin improvements in 2025 driven by higher-margin service revenues from the E4A acquisition and recovery in the engineering business, enhancing overall profitability. -
Operating Expenses
Q: What is the quarterly operating run rate?
A: The team anticipates a cash run rate of about $30–33 million per quarter, excluding one-time expenses, reflecting efforts to optimize costs. -
HPC Deal Timing
Q: What is the status of HPC deal timing?
A: Management is aggressively engaging with financial and infrastructure partners on HPC deals; if a deal isn’t finalized, they’d resume Bitcoin mining as needed. -
Dilution & Financing
Q: How will you minimize dilution going forward?
A: They aim to raise capital in a non-dilutive, low-cost manner to boost Bitcoin yield, while exploring alternative financing options rather than aggressive equity issuance. -
HPC Power Window
Q: Is the HPC power window widening?
A: They noted that power demand for HPC remains robust in 2025 and beyond, as large-scale projects face lengthy lead times, making immediate capacity extremely valuable. -
Site Conversion
Q: Can a site like Rockdale convert fully to HPC?
A: Yes, if the economics prove favorable, they are open to converting Rockdale completely for HPC use, given the strong demand and flexible asset approach. -
Leased Site Impact
Q: Does leasing Rockdale affect its attractiveness?
A: Despite being on a lease, its long-term ground lease—with initial 10-year terms and multiple renewals—keeps it attractive for hyperscalers seeking power capacity. -
Land Acquisition
Q: How much additional land is being procured?
A: They are actively acquiring hundreds of acres to expand development flexibility and meet diverse customer needs. -
Engineering Resources
Q: Will external resources be needed for HPC design?
A: They plan to leverage existing internal expertise while adding resources if required to support the design and build-out of HPC data centers. -
Asset Sale Option
Q: Are outright asset sales an option?
A: Management remains open to various deal structures, including outright asset sales if such options maximize shareholder value. -
Operational Metrics
Q: What are the build cost per megawatt details?
A: It’s too early to specify metrics like PUEs as design details and customer requirements evolve in the early stages of project planning.