Hey guys, welcome or welcome back to the channel McNal Money, the official home of Power Analysis. A great interview in store for you tonight as we're joined once again by the CEO of Riot Platforms, none other than Jason Les. We're going to be discussing their recently reported Q2 earnings, LOI at Corsacana, and upcoming milestones and outlook for the organization. Before we get into it, take a second, smash the like button, guys. Big help to myself and the channel. If you're not already subscribed, McNoney, feel free to join and let us know in the comments section below what you thought of tonight's discussion and if you're currently holding shares of Riot Platforms. With that being said, let's get into tonight's interview.
All right, guys. Away we go. A Labor Day special for you. We've got the CEO of Riot Platforms, Jason Les, back on the program following up on Q2 earnings, but we're going to be digging in on the LOI at Corsacana, strategy outlook moving forward, not to mention the new ERCOT batch zero updates. So Jason, always a pleasure to have you on. Thanks so much for making the time.
Bryce, Anthony, good to see you guys. You know, we make a quarterly thing out of it. Excited to talk about our progress today.
Yeah, it's always a great time. First question, you've been in the hot seat before. Highlights from Q2. Maybe we'll focus on the operational side. We understand you guys are in a transitionary period moving from mining to AI. What are the key headlines?
Yeah, you know, it's funny, you know, we are in this transition here. But it is clearly, I think, what investors are focused on the most around our stock. And when we think about the highlights from the quarter, I really think a lot of the highlights have to do with the progress that we're making executing on our data center strategy. So clearly for Riot, the highlights of this quarter are, you know, one, we have delivered the AMD development on time and on budget. That is that first phase of 25 megawatts is now in operation and then we're building out that second phase. Now everything is going according to plan. We announced our lease for 191 megawatts at Rockdale with a leading Frontier AI lab. So that has been a huge announcement showing the first tier three build now at that site. We announced the Corsacana LOI as well. You know, something that we don't typically get into, but we thought in this case it made sense to give our shareholders the market updates of what's going on at Corsacana. And we continue to show a very strong position between cash, Bitcoin, the financing tools, advancing on our AMD financing that we have underway. So, a lot of good highlights, a lot of good progress that we're making on the data center strategy, fully putting that portfolio together, and getting these megawatts in action.
That's great to hear, Jason. I mean, we've already seen you deliver the first 25 megawatts to AMD on time, on budget, and the remaining 25 megawatts is scheduled for completion, I think May 2027. What have you learned from that first deployment that changes how Riot will design, procure, and construct the next 200 to 500 megawatt capacity in terms of that path towards successfully delivering the industrial scale deployment that you're looking at achieving on both Rockdale and Corsacana?
Something that we talked about with the AMD deal that through execution has been validated is the solutions first approach. So when we started with AMD, it wasn't about how much money you're going to give us, what's this, you know, these different commercial terms. The start of the conversation is what do you need and how can we deliver that for you? How can we deliver that for you in build and on the timeline that you're looking for? And that's how we approach our conversation. That's how we approach engaging with customers. We are a solutions provider. And the fact that we are able to deliver capacity that quickly on time is a validation of that approach. Now AMD is in operation and to anyone who hasn't seen, we put a link to it in our earnings deck. There was a CNBC segment on AMD and what they're calling their mega lab out at Rockdale and it kind of shows what they are doing with that capacity and how important that is. So that deal was announced back in January and you know, you see CNBC segments about a mega lab in action just several months later in July. Shows the quick solutions that we're able to deliver and that customer first strategy in action and how we engage and approach and execute on deals.
Just to follow, sorry, just to follow on from that, with the progress of that first 50 megawatts, are you in discussions to look at the options for getting to the 100 and the 200, which has been outlined as potential expansions?
Yeah. So we have two customers at Rockdale right now and, you know, our legacy Bitcoin mining operations. We have AMD and then we have the leading Frontier Lab taking down 191 megawatts. We have overall 700 megawatts of capacity there. So there's more capacity to build out, keeping in mind we're talking about two different megawatt numbers, critical IT and then 700 megawatts is the gross utility power that's available there. So there is additional capacity for expansion there. Those who have first dibs on it are clearly our existing customers and that's our preference to work with. But if not, then there's a whole other universe of interested parties out there. You know, believe me that we are getting inbound interest all the time. So there's no shortage of options. It's just a matter of moving through the process. You know, different customers have different expansion opportunities within their agreement. We highlighted that back with AMD when their ROFR became a 100 megawatt option beyond their, so they have a total of 200 megawatts of potential capacity they can have and they have some time to work through that. So that's one of the avenues that we could take. If not, like I said, there's a whole other universe of customers out there.
And just finally on Rockdale itself, you've got 700 megawatts. We've just noticed that one of your neighbors has managed to increase their power capacity. Is there any possibility that Riot could increase that 700 megawatt or is that pretty much set in stone now?
I absolutely do think there is an opportunity to increase the power capacity that we have at both of our sites. You know, no one is better positioned to be able to take advantage of available capacity than an operator that's already in place around Rockdale. There's so much infrastructure being built out from a utility perspective to support all the commercial development that's going on in that area. So we certainly think that's an opportunity. I can't tell you what the timeline of that is or, you know, what that looks like, but we are involved in trying to get that done. And also at Corsacana, even though that site is already substantial, what, 1 gigawatt we're out there, you know, think we're well positioned to get additional capacity. Couldn't say when or how, but another thing we're working on. And at the same time out of Kentucky, we're always pushing all the avenues for growth that we already have and that begins with the sites that we already have.
Hey Jason, moving over to Corsacana. Obviously the LOI announcement was a key focal point of the call. Can you talk to us a little bit about in relation to your AMD execution? This is 756 megawatts of critical IT. This would be one of the largest colocation deals we've seen to date. What gives a company confidence in signing that type of deal with Riot? How does the AMD execution lead into that confidence? And then in terms of timing, what can the market expect from an LOI to a lease? Is there any sort of benchmark you can give us?
So I'll work a little bit backwards there, from your last question forward. So as far as timing, hey, this is a very unpredictable process. I can tell you from all the deals that we've done, whatever my idea of what the timeline was in the beginning changed a lot as time went on. There's a lot of complexity here, not just from a legal and commercial standpoint, but the design and engineering that has to all be figured out and be signed off by all parties to move forward, diligence, etc. These take a while. So, hey, timing I can't say. There's of course a risk that this specific LOI does not even materialize to a lease, but, you know, we feel great about the position that we're in regardless.
Our execution with AMD, every new deal that we do further establishes Riot's credibility as a data center developer and operator. And I think specifically what we've talked about with AMD and the speed that we're able to deliver and create this mega lab for a leading technology company, that says a lot about Riot's capabilities and I think that has improved the discussions in the market that we've had considerably. So I think that is a data point that the market sees about how Riot's able to deliver and that bolsters customers' confidence in us. Every deal that we've signed, so both of these deals that we've announced so far with AMD and the leading Frontier AI lab, they were an LOI at some point. We just, you know, never disclosed that. Kind of generally is not in our style with Riot. However, you know, the focus is so much right now on Corsacana, investors want to know what's going on, so we felt in this case it made sense to, you know, give a bit more peek under the hood than normal, you know, show some transparency and share what's going on, of course with kind of the risk caveats around that.
When you look at a site like Corsacana, you're looking at what is probably the most premier data center development site in the country. 1 gigawatt of utility power near a major metropolitan, near a tier one data center market. You know, the power is already running. Substation equipment is in place and more is arriving now. There's a ready pad available, active development work underway. This is a diamond in the rough. So, if there's a customer generally that's interested in getting some of that capacity, they're going to want to get all of that capacity typically because, you know, they don't want to lose access to something that's so valuable and, you know, give it up and have a competitor or someone across the street taking the other half of it. So that's why we've kind of always said from the beginning that we believe the most likely outcome for Corsacana is a single customer takedown. And that's substantially the interest that we've always seen is for the full site. So obviously that's a limited universe of companies out there that can take 1 gigawatt of utility or, you know, in some design cases 750 megawatts of critical IT capacity. That universe of companies is growing as the industry grows and capacity demands increase. But it's a limited universe of customers. And I think in this case you have someone who is looking for capacity and they're looking to get as much capacity as possible and Corsacana proving to be one of the premier sites in the country to do that.
It was November last year when we last visited Corsacana, the second of our visits there over the last few years, and we got to do a site visit in terms of looking at the new power conduits being installed. Can you give us an update on sort of like power capacity? When's the 800 megawatt likely to be fully effective and what's the plan for the remaining 200 megawatts in terms of preparation for when the LOI becomes a contract?
Sure. Yeah. So the site has already been in operation for two and a half years now with the first 400 megawatts underway. I'm not sure if it was there yet when you guys arrived, but we had received the next 400 megawatts of transformers that would take the site to 800 megawatts of capacity. That is on schedule to be completed here by the end of this year. So that is well ahead of any data center capacity being ready. That's something we've always said from the beginning on the question of power. We are delivering utility power way ahead of when the building will be scheduled. And that really derisks the project because that's oftentimes the riskiest part of the project. Hey, are we going to get that substation equipment? Is the utility going to be okay with everything that's happening? We've already crossed those bridges. So that next 400 megawatts is coming very soon. And then the final 200 megawatts, that is on schedule. That is also going to, you know, that'll come in 2027, but way ahead of whenever the capacity would be needed for that.
Hey, speaking of de-risking, one hot topic over the weekend, ERCOT batch zero process update. Can you talk to us a little bit about how Riot's positioned compared to maybe some of your peers in the Texas market?
Yeah, so Texas implemented this batch process for approving new loads. Riot sites with Rockdale and Corsacana are already energized base load. So they are not a part of this batch zero process. So it's something that we always want to clear up for investors. Our power is already approved. It's already interconnected. This batch process affects future sites. It does not impact our existing sites here. So I think this process is, you know, there's positives and negatives to this. It's obviously become more difficult to get power approved in ERCOT because of this process. That is a positive for Riot in that it makes our existing sites all that much more valuable. There's not, you know, all these gigawatts coming online every year quite as easily as they may have been in prior years. The downside, however, is our story doesn't end at Rockdale, Corsacana, or Kentucky. We are aggressively sourcing new sites all the time. We are working through, you know, probably 10 deals a week, thoroughly evaluating opportunities. And, you know, at least in Texas, this process makes that, I don't, I guess you could say harder, but right now a bit more uncertain on how much power each different site will get until this process goes through. I think what we saw over the weekend or recent weeks is kind of a validation of the classifications that different loads had, whether they're batch zero, conditional study, etc. That whole process still is going to have to play out over the next several months. I believe they're not slated to kind of give full megawatt allocations until sometime in spring. I think April or May, or that timeline could always change, but we're at least seeing initial signals and certain sites are getting, you know, validation of the status that they're in and gives them more certainty on what their path is forward from there.
Yeah, it's good to hear. With regards to the deal with the Frontier AI lab, who I think Bloomberg came out and acknowledged it was Anthropic. This 20-year lease generating 9.1 billion of revenue. I mean, we looked at the numbers of that there and it was an extremely good set of numbers for that size of that contract. We are seeing now for these type of contracts numbers getting ahead of 2.4 million per megawatt, maybe 2.5 million on some of the, maybe where you're not got a hyperscaler, some of the neoclouds and the enterprise companies, they're paying maybe a little bit more at the moment. You've already acknowledged that Corsacana is going to be probably one of the biggest and the best data centers in North America. What, you know, in terms of expectation, do you expect the revenues to flow from that type of a site as we're seeing being provided by peer companies at the moment?
So with respect to market rents, I think we're seeing a few things in play. First off, inflation is always going to be driving rates every year, all else being equal. I think the second thing is, of course, demand continues to outpace supply. So megawatts are becoming more and more valuable over time. But I think the other thing that, you know, people should be aware of that's happening is the costs have been increasing. So if you look, for example, Riot still for this Frontier lab, we put our capex estimate at 11 to 12 million per megawatt. Well, that's, you know, significantly higher than some of the deals that we've seen announced in prior years. That isn't, you know, because it's because customer requirements are evolving and they're looking for more robust designs and the prices of this equipment to achieve that redundancy is going up. So rents are not just a function of market demand. They're also a function of the capex cost to build what the customer is asking for. So if you see build costs going up, all else being equal, we should be seeing rents going up as well. So there's three things at play there, all driving rents up over time. And that would impact what the economics are for a Corsacana deal as well. If you're looking for a similar tier three design with this level of redundancy, you're probably expecting a similar type of capex cost. And then, of course, we're going to be looking for a similar return and, you know, rents in the same neighborhood. I can't say it's going to be exactly the same, you know, or a little higher, a little lower. Let's just say that they're probably going to be in the same neighborhood going forward. We recognize we have a very valuable asset here and there's a substantial amount of shareholder value equation that can be realized really by just doing a kind of middle-of-the-road deal here. There's no need to get incredibly creative in order to get things done. It's a huge lift. You know, 750 or so megawatts is an enormous deal. As you noted, we haven't seen any deals of that size signed yet. And you can imagine the amount of work that goes into a customer, you know, agreeing to spend over $1 billion a year when a site is fully stabilized. Over 1 billion, I should say. You know, what the ultimate economics are there, you know, we'll wait till the deal is done to kind of commit what those are, but you can kind of expect the same neighborhood of figures as you're seeing already.
With regards to the deal with the Frontier labs at Rockdale, I mean, the net operating income margins are exceptionally attractive. Are you confident, knowing what you're delivering at the moment in terms of the AMD deal, of achieving those margins? And is the AMD deal sort of like a great learning experience to help you, you know, when you start delivering these really, really big contracts going forward?
Yeah, I think every deal, every step helps with the next one. In anything in life, experience builds more expertise and helps you learn things. And that is, these are the type of lessons we've been able to build on an accelerated basis because of what we've done with AMD. You know, but you highlight here with just what we have with AMD, with the 50 megawatts right now and this Frontier Lab lease at 191 megawatts, that's 241 megawatts yielding an estimated NOI of, you know, depends on what the ultimate margin is, of 416 million to 462 million a year when stabilized. And that's just for a fraction of our portfolio. So that's the incredible opportunity here is how much cash flow we have the ability to generate with our megawatts as we develop more capacity and as we sign more leases. And, you know, I know we already touched on the opportunities to do that. And every single deal builds upon itself. You know, we deliver for AMD, that builds credibility for this deal. We demonstrate, we execute on this, that's building credibility for the next deal. And all of this compounds on top of itself to establish Riot as a leading data center developer and operator.
Yeah, that's great. Hey, speaking of development, Kentucky is currently Bitcoin mining. We're starting to see more action in the Bitcoin market. Starting to see some increases in terms of price. Is that site still earmarked for Bitcoin mining down the road, AI? And how do you think about this transition as the price of Bitcoin continues to rise?
So for us, Bitcoin mining is a tool to secure and monetize power until we can convert that for data center development. Clearly, data centers are far and away the best use of megawatts. We're looking to get the best return on our portfolio, monetize our assets the best way we can, and that is data center development and leasing. So in Kentucky, we have a good amount of power there currently being utilized for Bitcoin mining. I have been impressed with the level of interest that we've actually seen for that site. I thought that was going to be a little farther down our growth path than I think it may end up being. There's a good amount of interest and we're working through that interest right now. But at the end of the day, every megawatt that we control has the potential to be turned into data center leases. And that's our framework for how we identify new sites. We're not getting power just for the sake of getting power. We are looking at sites that we're making sure are a market fit for our customers, that have the properties that they're looking for so we can turn those into data center developments as well. So yeah, Kentucky is in the pipeline here. I don't have anything to share about that now, but very pleased with the amount of interest that we've seen in Kentucky.
