And so depending on how that ends up, that’s right on top of our portfolio, basically.
Josh Siegler: Yeah. Understood. Thank you.
Operator: Thank you. One moment for our next question. And our next question coming from the line of Bill Papanastasiou with Stifel. Your line is open.
Bill Papanastasiou: Yeah. Good morning, guys, and congrats on the pyramid. Thank you for taking my questions. I just have one here. Tyler, we’re just hoping you could share your thoughts on how you see the industry evolving over time with respect to consolidation. If we look at the universal public bitcoin miners, it’s evident that operators who focus purely on bitcoin mining have achieved arguably superior financial performance and scale. And a number of these players are building massive data centers. And so what’s your take on the appetite to acquire subscale peers? Has that diminished at all?
Tyler Page: Thanks for the question. I’d say we look at everything. We’re always looking for an opportunity. I think often sites are for sale or sellers are distressed for a reason. Sometimes I’d say most typically we screen things out because we’re just not interested in power prices that we don’t think are sustainable, through a Bull and Bear cycle. The competitive landscape is getting larger and larger scale. It does make sense that the large scale players are going to do better on a going forward basis. I think being a registered company in the US gives people great access to capital markets to fund expansion and also gives you scale to negotiate lower CapEx, et cetera. I think there are folks out there that are basically to your point, maybe bitcoin mining is not working that well and the shiny new toy is something like AI.
We’ve looked at all kinds of AI proposals and eyeballed it. That is not currently on our roadmap. We are much more interested in opportunities to sort of integrate upward into the power industry. And so we’ll continue to look at that. But I think going forward to your question, it’s dynamic. I mean, bitcoin prices are going up so fast right now. Who knows what the price is going to be at the halving maybe bitcoin price bails some of the less efficient guys out. But if you assume we go forward with very large network hash rate growth and non-completely parabolic bitcoin price increases, I think you’re going to see a dispersion among the miners. I think people are going to stop looking at these companies as the same thing and seeing them trading all in line.
And as I mentioned earlier, in our case, we think the ability to have a team, a company operations technology that can effectively produce its own cheap power from the free market in the way we interact with the grid, particularly in places like Texas, that’s just going to make us more sustainable. So from an M&A perspective, the challenge is, you know, I don’t — we don’t love the hosting business really in either direction around a halving with new chipsets coming out. I think that business is going to be challenged and so, we’re less interested in general in sites that are for sale that have hosted clients with contracts or maybe have obligations on the power side that they can’t necessarily pass through to clients. There are challenges like that, that sometimes make things for sale.
Overall, I think the differentiator for us is, are there companies that look at Cipher and say, wow, those are the best-in-class unit economics and they have large scale and expansion and a clean balance sheet. So we’d love to effectively aggregate with them to become a very large player. I think that could be something that becomes interesting to us. There is an interesting valuation gap in our opinion between us and some of the biggest miners where we think we’re running a better company, frankly. And so if there are opportunities that we think are very good price and very accretive to shareholders, we’re certainly looking.
Bill Papanastasiou: Great. That’s amazing color. I think your strategy makes sense just given your superior unit economics. The lowest cost producer of a commodity always wins. That’s all the questions I have. Thank you.
Operator: Thank you. [Operator Instructions] The next question coming from the line of Joe Flynn with Compass Point Research. Your line is open.
Joe Flynn: Hi, guys. Most of my questions were asked, but I thought I’d maybe just ask about one thing that was brought up earlier, was at some point the six year PPA, I think it’s a five-year deal, but can you walk us through maybe the process of renegotiating that? I mean, you guys have clearly demonstrated that it’s best-in-class economics, and do you ultimately see like risks there and just regarding that like are those kind of deals still out there for, let’s call it newer miners that haven’t demonstrated a track record yet. Thanks.
Tyler Page: So thanks for the question. I think from our perspective, part of the reason that contract was set up as fixed price is the market was a little bit cheap on a forward basis, and we could lock those prices over five years. And so we chose to do that. As you mentioned, we’ve got 3.5-ish years left on that contract. We’re in constant negotiations, and it’s sort of it’s a symbiotic relationship with our power provider there because they’re giving us curtailment notices, we’re managing curtailment. We provide a lot of data, we work — we’re in constant contact with them. So listen even with that amazingly cheap price, over the life of that contract, we’re going to pay something like a $0.25 billion to our power provider.
So I think there’s every commercial incentive for us to keep working. We are co-located with their data center, and we’re in constant negotiations about things that happen beyond that five years, but also expansion opportunities, other opportunities, potentially at sites with them in other places, et cetera. So, I’m optimistic that over time we’ll extend, or alternatively, if there are amazing sites down the street, we certainly have that capability now with four larger data centers in Texas, and hopefully more in the pipeline as they come available, we’ll find whatever the best outcome is for shareholders. But we’ve got a few years. I think you asked if those opportunities are available to new miners. I would say they weren’t even available to old miners because like that counterparty, for example, gave anecdotes about how lots of miners had knocked on their door for an opportunity.
And from a counterparty perspective, we showed very professionally we could post double-digit million dollars of collateral to support the contract, et cetera. So, I think it’s hard to go through the counterparty analysis, even if you have built space. Right now, as far as doing new deals like that, I mentioned the economics that we can effectively replicate from how we curtail at Odessa to take a front of the meter floating price site and more or less through the tech ops and trading stack we’ve built manufactured our own results from the floating price. I think that means that right now, floating price is more attractive than what we’ve seen for market hedges, which is why right now we haven’t been doing as many fixed price deals that will change over the course of years, cycles happen.
So right now, I think, the best way to do it is to try to manage curtailment manually and participate in those demand response programs, whether you’re us or anyone else. I think the difference is we’ve invested years and a lot of money in a team, a tech stack, in an operations set of procedures, and people that can manually operate and take advantage of produce those economics. I think that’s very hard to do at smaller scale or with a different team.
Operator: Thank you. Now last question in queue coming from the line of Mike Colonnese with H.C. Wainwright. Your line is open.
Mike Colonnese: Hi. Good morning, guys. Great quarter and thank you for taking my question this morning. I’m curious to what price range you’d consider on a cost per megawatt basis to acquire infrastructure as you evaluate some of these M&A opportunities out there. Thanks.
Tyler Page: Thanks, Mike. I’d say it’s dynamic like everything else, right, I mean, the bitcoin price is going up, enthusiasm is going up. I don’t think anyone’s ever going to get the price we got for Black Pearl. We paid $7 million for a 300 megawatt, ERCOT approved site. So, no, it’s not built. But having the sort of approval and capacity to go to 300 megawatt, is an amazing price, and far, far less than I’ve seen anyone achieve. I think it’s dynamic it’s really site by site. It depends on what you’re buying, what the power contract is, what are the opportunities to do things like manage your curtailment and be paid for that, so that you can sort of, again, manufacture your own cheaper prices. And then if there’s hardware there, what’s the state of the hardware?
Again, we’re due in diligence on some sites. Some sites, the hardware is pristine, at other places, it’s not. And so coming up with a secondary market value for things like, if there are rigs there or substations, transformers, et cetera, is it a building, containerized, et cetera. So I’d say every situation is a little bit different. But where we always start is, we typically look for a minimum of scale. We screen out things most often below 50 megawatt, unless there’s a compelling reason to look at them. Next thing we look at is the power, how sustainable is the power? What are the risks that the power could change, or what’s the regime like, et cetera? And then beyond that, it’s kind of a market price evaluation of what equipment might be there.
So it’s hard to give a stock answer to that, other than basically anything we do with capital at the company starts with a return on investment calculation, and that’s whether we’re buying rigs, buying power, or buying a site. And so all I can say is we will remain very disciplined and try to make investments that we think are going to have a fantastic return for shareholders.
Operator: Thank you. And that’s all the time we have for our Q&A session. I will now turn the call back over to Mr. Tyler Page for any closing remarks.
Tyler Page: Well, look, thank you very much to everyone that participated on the call. We are really excited. We have been thinking about the halving for years when we built this business and even this earnings call, getting excited to talk about where we would be positioned going into this really transformational period in the space. So, thank you for your time, and we’re very excited to give you further updates in the coming months.
Operator: Ladies and gentlemen that does conclude our conference for today. Thank you for your participation. You may now disconnect.
