TeraWulf Inc. (WULF) Q2 2026 Earnings Report, Transcript and Summary

Greetings, and welcome to the TeraWulf Second Quarter 2026 Earnings Conference Call. [Operator Instructions] 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 TeraWulf. Please go ahead.

Good morning, and welcome to TeraWulf's Second Quarter 2026 Earnings Call. Joining me today are Chairman and CEO, Paul Prager; our CTO, Nazar 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 a 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 GAAP 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 Justified Data 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 #1 priority remains execution. You see that most clearly at Lake Mariner. CB-3 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 FluidStack's obligations to become effective. CB-3, therefore, represents more than just the 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 FluidStack 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. Nazar will cover construction and commissioning in greater detail, but the key milestones are straightforward. At CB-4, we remain on track to begin energizing the first data hall in late September. At CB-5, we expect to begin energizing the first data hall in very early January. The first data hall at CB-4 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 CB-3 is online and generating revenue. CB-4 is in commissioning and CB-5 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. Lake 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, control the power infrastructure and converted that position into long-duration contracts 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 1 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 a 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 queue 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 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 for an 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 TeraWulf'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 29, 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 1 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 utility-supported grid-connected campuses. 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 Hochul'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 WULF Compute build-out at Lake Mariner is already permitted, and Lake Hawkeye 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 TeraWulf 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 for long overdue investment in the nation's transmission and generation infrastructure. That is where TeraWulf is positioned. So when you step back, the progress is clear. We've delivered CB-3 and brought another contracted revenue stream online. CB-4 and CB-5 are advancing against updated customer aligned schedules. We've expanded our Kentucky platform through the Anthropic lease of justified 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 recycle 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, CB-3 is fully online and generating lease revenue. With that building complete, our focus is now on executing against the updated delivery schedules for CB-4 and CB-5, which were developed in close coordination with our tenant. From an execution standpoint, the 2 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 continue 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 customers 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 CB-4 stands today. Commissioning generally progresses through 6 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 is 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 for start-up and prefunctional 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 functional performance testing is the contractual delivery milestone. Once testing is complete, the data hall is turned over to operations and begins generating revenue. The first data hall at CB-4 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. CB-5 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 the scale where construction, commissioning, equipment delivery and systems integration must all progress together. In summary, CB-3 is operating and generating revenue. CB-4 has been commissioning and remains on track for initial delivery in late September. CB-5 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 Nazar described, the first data hall at CB-3 achieved ready-for-service status in late June and the second data hall followed in mid-July. As a result, the second quarter included only a partial revenue contribution from CB-3, while we entered the third quarter with 102 critical megawatts operating and generating lease revenue at Lake Mariner. Importantly, completion of CB-3 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 time line. TeraWulf will contribute approximately $150 million to address tenant fit-out costs incurred through June 30, 2026. In return, WULF Compute 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 CB-4 and CB-5, the amendments are expected to generate more than $500 million of incremental lease revenue for WULF 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 WULF Compute and $6.0 million of development costs across our portfolio of uncontracted development sites. Adjusting for these 3 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, pre-revenue operating costs decline and the contribution from mature 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 WULF Compute senior secured notes in April. We recorded a $755.7 million noncash loss from the change in fair value of the Google warrants compared with a $216.3 million noncash loss in the first quarter. The change was primarily driven by the increase in TeraWulf 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. GAAP net loss attributable to TeraWulf was $939.9 million compared with $427.6 million in the first quarter. The increase was primarily driven by the noncash fair value adjustment associated with the Google warrants. Non-GAAP 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 on or before December 31, 2026, and approximately $130 million on or before April 30, 2027, subject to the terms of the transaction. At WULF 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-earning construction accounts. Approximately $2.3 billion of project capital expenditures have been completed with approximately $1.7 billion remaining. Approximately 2/3 of the remaining expenditures are committed, providing increased visibility into the remaining capital requirements. As a reminder, our original cost guidance for the WULF 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 Nazar discussed, including electrical labor constraints and evolving customer equipment and operating requirements are reflected in this updated estimate. Following the FluidStack lease amendments and TeraWulf'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 30, 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 TeraWulf 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 WULF 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.

[Operator Instructions] Our first question comes from Nick Giles of B. Riley Securities.

It's good to see the 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 kind of stop what we're seeing here with Kentucky Power?

Nick, it's Nazar here. So with the utilities, I think we're seeing a couple of 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 will 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 posted to Kentucky Power and AEP.

That's super helpful. I appreciate it. Maybe switching gears. WULF 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 high IG?

Yes. Nick, it's Patrick Fleury. 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 we have terrific tenants, both at Lake Mariner and at Hawesville. I think you saw us buy Hawesville in February and lease it less than 6 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. We -- 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, not necessarily immediately today, but also 3, 4, 5 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, their balance sheets today are not going to be their balance sheets in 5, 6 years. So I think there's an element of us solving for all of those things as we're looking at tenants. But I think stay tuned. And I think as we grow our site portfolio, naturally, the tenants will diversify.

And Hi, it's Paul here. It's the same from an operation and execution perspective. We're 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 our customer in Anthropic, and it just makes things that much more efficient in how we build out our facilities for them and how we operate the facilities for them.

The next question comes from Darren Aftahi of Lucid Capital Markets.

Just 2, 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?

It's Nazar here. I'll take your questions in reverse 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 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, 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 of 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 3 or 4 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 the 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 true -- 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 very clear visibility with respect to their ability to start using that. So I think there are a number of things that we're looking at that could increase that. But yes, for now, we remain focused on that 250 to 500 per year. With that, I think Paul had some other thoughts as well to add.

Yes. This is Paul. Thanks, Nazar. 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. 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 machinery in one part of the boat. So if you hit that part of the boat, they were dead in the water. American submarine design was we would put major machinery throughout our boat 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. Inference is 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 fundamental to what we do.

The next question comes from Michael Rollins of Citi.

So just building off of the last few questions. I'm curious, if you take all of that together, are you able to size what the incremental pipeline opportunity could be, maybe kind of thinking about it over the next decade. Currently, you've got 2.9 gigawatts of, call it, line of sight of lease capacity in pipeline. Just curious what the TAM is or how big that can get to? And then second, with certain regions seeing some new headwinds on timing, for example, recent developments in Texas or you mentioned you 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?

Yes. This is Patrick Fleury. So we are a long-time 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 stand-alone 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 0 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 0 projects. Combined cycles are 500 megawatts each roughly and take 3 years on average to build. So you 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 single or double point of failure, but connected to the grid that has thousands of points of failure, but also not being a parasite on the grid and providing additional generation and even backup 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.

Yes. And it's Paul. It's why I said in my remarks, it's nice to know that you're somewhere in the queue or that you're in batch 0 versus some of the batch. But we're all about available contracted power and that's where we focus. You asked first about how big could this go. I don't have an answer for you. Demand is extremely strong. At our Muskie site, we have the most active data room we've ever had and with world-class credits as potential customers. But I don't focus on that. I'm trying to focus on execution. And the simple response is 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 in my comments. Can we do more? Maybe with the right EPC contractor, somebody like [ Fluor ] with the right region where the labor is available, with the right mature and sophisticated regulatory framework and policy, absolutely. 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 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. 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 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 queue position and a batch position versus a contract with an investment-grade credit to supply giga 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 could come online and that it's a very credible project. So we're excited about where the market is today, and we look forward to continue to participate in its growth.

The next question comes from Tim Horan of Oppenheimer.

A question on execution really. 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 getting more electricians and HVAC trades, et cetera? And do you have the cost kind of locked down for them, I guess, especially on the Anthropic 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 talking about building out 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?

If it's okay, I'll start. One of the things that we're very excited about is our relationship with Fluor and the Kentucky project. They're top quality world-class EPC that we have a history with on the power side. And one of their -- the reason why we like them so much is because they've been really good at bringing in top quality talent and locking them down in contracts for the performance of EPC duties on site. So I think that's one driver. The second thing is experience. We grew up in the trades building power plants. So we just have a lot of experience in working with the right subs and contractors. And we like again, we're sort of risk-averse here. We like to sleep at night. We like to lock down pricing so that we could get comfortable. Early on, I think that was tougher in the space because there wasn't, if you will, a reference design. So both everyone needed to figure out how much man hours and how much work needed to sort of go into delivering a data hall. We have that reference design now. So we could help our subs better understand the scope and the project and therefore, get them to take more risk with us and give us a fixed price contract. Naz, did you want to add something?

Sure. And just -- this is Nazar 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. To the extent that we want -- the demand is there, and we wanted to do significantly more than that, finding those folks, as you correctly point out, is a challenge. And so as Paul mentioned, working with the Fluors of the world, working -- building off the relationships that we have, both 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 the procurement of the equipment as well as the 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 kind of our guidance as well, and that's part of the reason we have this 250 megawatts to 500 megawatts per year that we've been guiding towards.

The next question comes from Mike Grondahl of Northland.

This is Logan on for Mike. First and kind of building off an earlier question, can you provide some additional insight into the demand and discussions for the now potential 2-gigawatt Muskie site relative to Hawesville? And then second for Patrick, can you touch on how we should think about financing that development?

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 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 multiyear 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, we think is becoming more and more kind of what's left on the table. Most of that '27 capacity is either sold or pretty close to being sold. And so therefore, there is a heavy emphasis on '28, and we're finding a very strong demand. And again, we're -- all of the usual suspects are working hard with us and working on that side.

Yes. Patrick. Yes, regarding the second question, look, I think you'll see us follow the model that we opened up the markets to last October, which is 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 WULF 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 we are not levered to the eyeballs like a lot of our peers. We have conservative leverage, and we generate a 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 Hawesville 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 we will be back in the debt capital markets to finance Hawesville. And then I expect likely sometime probably first half of next year for Muskie.

The next question comes from Stephen Glagola of KBW.

Paul, can you provide any more color on the 3 to 5 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?

Yes. This is Patrick, Stephen. I'll take the last one. I would just reiterate what we said in that the Hawesville lease will be supported by an investment-grade credit. The fortunate position we are in, right, as we went to the market, did a large equity financing in April. We just sold the JV. We have $1.5 billion of cash on balance sheet today. That's plenty of runway. We don't need to rush to the market. And that was done on purpose, as we've talked about, because each time we had announced the 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 market 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, do you want to start?

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 4, the 3 to 5 pursuit sites. If that's the case, you should know that the same principle of regional diversity is driving those discussions. We have a team actively led by Kerri Langlais, which looks at dozens of sites real time. I think one of the sites of the 3 to 5 is certainly going to be our first effort at international data center development. We've had tremendous success developing power plants in a number of countries outside of the U.S. We think that we have the skill set to bring home a data center for customers that want to move to some of the better opportunities in Northern Europe. We're very excited about that, but we're not there yet. So when we get there, we will 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. We like the Southeast quite a bit. So we're looking at sites, talking to our customers, asking what their needs are, where they think they want to be. But again, for us, it's all about available power and our ability to quickly contract that power. 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 won't -- they're not going to be credible or they won't have the requisite experience to develop it or they won't have the cash to sort of post a collateral to get surety of power. And I think there'll be some additional opportunities for companies that are well positioned like TeraWulf as a result of that.

The next question comes from Chris Brendler of Rosenblatt Securities.

Congrats on the results here. I was just going to ask on the FluidStack lease modifications. I wasn't quite sure sort of what drove the changes. I feel like it's coming from the client, but was it increased costs that were being -- you're running into? Or was it just modifications of design that caused those changes? And the increase in equity, was that -- did that it 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 want to get a clarification there.

Yes. Chris, 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 CB-3, 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 TeraWulf's project. And so those -- what you're hearing from us is those impacts were about $150 million at Lake Mariner that TeraWulf in a series of negotiations agreed to fund that is being recovered over the 10-year lease term. That recovery just for those items is over $300 million of rent. So we're effectively receiving 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 the amortization and deleveraging profile of the project and cash flow profile of the project has significantly increased. So again, I think that's a different approach that our team is taking as opposed -- I sort of have a saying internally, just because you can doesn't mean you should. Leverage is great, but I think we want to be very balanced with it, particularly as we build and operate brand-new projects.

That's fantastic color. One quick follow-up, may not quick, but we've seen 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 and Kentucky?

Yes. I don't think we've seen anything that we should be surprised about. We have stated all along that ultimately, listen, data centers are very, very important, but it's also important that they're done right. And so I think everyone is 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. 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 doing this. Listen, you will always have people who can be particularly loud, who don't want progress, who don't want power plants, who don't want data centers. But the reality is we need power in our country. We're very short, and we need data centers. And the contribution of both power and data, it's what made America such a great country. And so I think in Maryland, we've gone to an industrial site. It's an existing power facility down from a much larger coal facility. We're going to work with the state to clean that up. That's a benefit to the state. We're going to bring jobs. That's a benefit to the state. Maryland is desperately short power, so we'll 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 perspective territories in terms of data center use, particularly the 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. And we're generating important tax revenue, which supports school systems. It supports highways. It's just fantastic. So Kentucky and Maryland, we're very excited about. You mentioned West Virginia. It's an area that we study a lot. We like it a lot. We think, again, they want to win and create an opportunity in business environment where we could do a win-win. So as I mentioned, when we talked about development, the regulatory framework, the political horizons, these were all things that we contemplate. And remember, we're building power and data centers that are going to 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 currently active or in the pipeline in any real material way.

Our last question comes from Michael Funk of Bank of America.

Maybe just quickly, you touched a few times on some of the constraints with labor, particularly electrical labor, also highlighted estimate for cost per megawatt. So just wondering what protections do you have in your contracts for rising costs? And then maybe how those costs are impacting development yields or returns projected. I'd love to hear any comments there.

Sure. This is Nazar here. 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 costs 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 forecast 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 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 on a cost per hour basis, 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 12 to 15 months long. What we do is working with Fluor and other vendors that we have is that 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 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 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 with each successive contract as well. And again, from a cost management perspective, then the equipment, 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've 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 we have the most work to do. So it's not a perfect science, but working with Fluor and others gives us a chance to kind of control that.

And this is Patrick. Let me just address the yield question because that's the right one. But as I mentioned earlier, like the most important part, right, 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, we are very open with our customers that we need a mid-teens return. That is simply because if your WACC 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 5 points of WACC. If your equity costs 25%, right, that's another 5 points of WACC. So your WACC is 10% in that example. So for us to have -- sign a deal that is accretive to our equity, the yield on cost has to be greater than the WACC. So I've sort of seen some folks in our market signing deals that appear where their WACC is actually in excess of the yield they're earning on the lease. Like 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 1.

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