Out of Compute North’s bankruptcy rises a 300MW Bitcoin miner with a new energy offering

A group of energy and bitcoin mining veterans is developing a 300 megawatt (MW) hosting site in Corpus Christi, Texas that will give customers an unusual option in how they manage their electricity costs.

The area will be connected to the grid and will be co-located with an additional 300 MW battery storage. Customers will be able to form their own power management strategy and decide whether and how to participate in demand response programs.

The company building the site in Texas is called Saxet Infrastructure Group. The all-in hosting fee will not be fixed. Instead, Saxet will pass on variable energy costs to its customers and charge a fixed management fee that will be lower than many of its competitors, the firm said.

Electricity is usually miners’ biggest operating expense. Many hosting contracts signed during the 2021 bull market had a fixed price, which included an energy and administration fee. These fees became unsustainable for host companies during the 2022 energy crisis.

“In a fixed-price hosting market, as we’ve seen the market shake out, usually one party ends up losing,” either the customer signs up for a fixed price that turns out to be too high, or the price is too low, and so the the hosting partner for the infrastructure partner at risk, said Ro Shirole, who left retail-facing hosting firm Compass Mining to join Saxet as its chief commercial officer.

The site in Corpus Christi that Saxet is building also suffered from this common host conflict.

But another problem was that Compute North’s service agreements did not allow it to pass through energy costs. The company could only turn off its customers’ machines when energy prices exceeded a certain level. “While this mechanism helps manage expenses during a period of high power costs, it is not an effective strategy for dealing with long-term energy price increases,” said Harold Coulby, CFO of Compute North in a filing with US Bankruptcy Court in Southern. Texas.

Two of Saxet Infrastructure’s executives, CEO Steve Quisenberry and Chief Operating Officer Matt Held, were also partners in Bootstrap Energy, a company that Compute North had hired to develop the Corpus Christi site in March 2022. Bootstrap Energy also owns the land on which the site is . on. Shirole left Compute North in December 2021 and has filed an employment discrimination lawsuit against the firm.

Compute North stopped paying the development firm in the summer of 2022, and as of the bankruptcy date had not paid $14.9 million. The probate court rejected the development contract, and so Bootstrap Energy was back in the saddle to develop the site.

The site’s location offers several advantages, Held said. The relatively moderate temperature in South Texas, near the ocean, is much cooler than other parts of Texas, including West Texas where many miners have flocked. It is also located at a lower altitude, which results in denser air. The lower temperatures and the more humid environment help to reduce the costs of refrigeration machines.

The area is also home to nearly 7 gigawatts of wind power generation, with the winds not slowing down in the afternoon, as they do in West Texas, Held said. Demand for electricity in the area is fairly stable because it is home to industrial facilities that require steady amounts of electricity throughout the day and few population centers, he said.

The site is still under construction and the Saxet team is now signing contracts with tenants. Saxet has secured all the capital needed to build the site from a multi-billion dollar New York private equity firm and a private investment group. The funding will be released once Saxet has reached a minimum scale of customers, Quisenberry said.

The new company expects a full 300 MW of host capacity to be up and running by the end of the year.

Saxet only takes contracts larger than 25MW from institutional customers in order to execute its tailored power management strategies, Shirole said.

“Quite a few of the big miners that we’ve gone through the structure of this really see this as the future of large-scale mining,” Shirole said.

However, the strategy may also change over time as both the market and regulations change, and customers will periodically review their power strategies, the Saxet executives noted.

“Full transparency about energy pricing with our customers is key to what we do,” and to the industry in general, Quisenberry said.