HUT8 CEO Asher Genoot dives into Q2 earnings update

How's it going, guys? How you doing?

Overall, what I think Greg Abbott has done is extremely good for the ecosystem, and you actually saw even QTS came out and supported him. We need more people to give kind of local voters, constituents, community members comfort that data centers are not this big scary thing that's going to come and take everyone's water and increase energy bills and so forth. I think what we're seeing a lot across the country is that this misinformation has spread and really gotten into people's heads, and for a data center developer it's harder to get there and say, 'Hey, look, we don't do these things,' because they think, 'Okay, well, you are biased in saying that because you're trying to invest into this project and obviously you're going to say the data centers are fine and not going to consume water and so forth.' So, I actually think what Governor Abbott did was extremely smart because there's so much investment in data centers going into Texas and it's better to get ahead of this and say we're going to make sure that this investment is done in a responsible way that helps build communities rather than let the fear become so large that it's hard to reverse later. And so, like, we're extremely supportive of the initiative.

And also, we were one of the few that actually responded to the PUC in their questionnaire that related to a lot of these topics. And frankly, that questionnaire was many of the same things that Governor Abbott and his office released. And so overall, we're going to work through the process, but think this is good and healthy for the ecosystem because he also didn't take an extreme approach like New York, where they said, 'All right, we're going to do a moratorium, no more data centers.' He said, 'We're going to do an audit process to make sure that these investments are good for the communities and don't have a negative impact.' And I think that's great.

Correct. We already have an interconnection agreement in place. So, and it seems from what we've seen from Morgan Stanley that there's a high chance—and I'm not going to try to get you to say this with certainty, I understand that—but there's a high chance that Hut 8 will be considered base load for this Batch Zero and that it should smooth over the process. So, you're generally confident about Hut 8's prospects, I would assume, going in even to this audit and into the extension of the Batch Zero.

Yeah, before the extension happened, obviously today was when they were supposed to release it, was when we felt very confident and such. And I think at the end of the day, like, the criteria doesn't change, right? The amount of developments doesn't change. And I think all of the questions that Governor Abbott had asked in his audit are things that we've already answered publicly through the PUC survey. And so we think that this is net positive, and it's not helpful, obviously creating some volatility into the ecosystem, volatility into the Hut stock today, but overall, like, we are proud of the projects that we're building because, like, I'll give you an example, and I spoke about this to our team the other day. Our first site that we ever built back in the Bitcoin days was a former DuPont sodium smelter that was a brownfield site that we retrofitted because it had a 50-megawatt substation into a Bitcoin data center. And when we were building that site, the subcontractors that were there were talking about how important that factory was for their parents and their grandparents. And it was like it was a central part of the community, right? It helped employ a lot of folks. People thought fondly of the factory. And I think data centers should have that similar impact on communities they go into, whether it be by the folks they employ, whether it be by the technologies that they can teach people, right? We're looking at different things where we can work with local schools and teach them on the technologies, the infrastructure stack and so forth, or the different community projects that they invest into. And so overall, like, there's too much negative sentiment on data centers out there. And I think what I've heard through kind of some folks is some of that is driven by foreign adversaries, some of that is driven by different kind of stakeholder groups. But at the end of the day, what should come out is the truth versus what's real and what's not. And any process that helps verify what's real and what's not, I think, should be welcomed because it's hard to fight against things that are not real. It's much easier to just say, you know what, these things we don't do. We do not consume water because we have a closed-loop water system. We pay for energy infrastructure outputs and our supply. We're not driving price up. We're actually helping the grid by increasing infrastructure, right? We don't have big noise concerns because we've run all the noise and traffic studies. All of these things a responsible developer should do, and that's how we're going to allow us to go and compete against other countries in this AI race. But like, we've got to get ahead of this, otherwise we're going to just be dealing with all of this FUD that is going to be hard to actually develop responsibly.

Sure. We have sites across the whole US today. We have, I think, over 10 different states that we're operating within and looking at different projects within those sites range from end of '27, '28, '29, and some in 2030. That kind of, and some of the sites ramp up per year as well. And so, it's a whole slew. You'll see that number continue to increase. We are spending heavy investment on growing that pipeline. That pipeline does not include all of the M&A opportunities that we're exploring right now as well. We have a whole team that explores those opportunities or behind-the-meter generation opportunities where we can bring generation and power where there's a lot of opportunities there as well. And Batavia is a relatively small site of ours, it's 50 megawatts right outside of Chicago. That site is going through a restudy process with ComEd now, and when it goes through that process, there's ample demand there, but it's a relatively small project in our whole portfolio.

That's right. We don't include expansion at Riverbend today.

Sure. We have interesting timelines that the utility has provided, and then we have some other kind of go-fast solutions on behind-the-meter generation on that campus as well, and we have multiple folks that are interested in that capacity, whether the roof is executed or not.

So today we have zero debt at the Hut parent level, as you had mentioned, and that was done very purposefully. And also, the financings that we did at the project level are all 16.5-year investment-grade bonds. So there's no refinancing obligation. A lot of the construction loans that you see, once you build it, you have to go refinance in the market and you have to raise capital to pay off the loan and then have a longer-term loan that you put in place. I think the reason why we've done both of those things is the markets are volatile, as we see today, right? It's down 22% this week because of some letter that was posted that we actually think is good for the market. And so as a result, like, the market is volatile and we've lived through that volatility, especially in the Bitcoin world. And what we've learned is it's actually really good to be in a place of strength when the markets are not strong. And so having a really strong balance sheet and having no refinancing needs allow us actually to be a buyer in markets where things are cheap because I think when things are good, I think that's when you bolster the balance sheet, and when things are bad, that's when you deploy. And so that's how we think about strategy and how we think about growth for the company.