DATA CENTER: Terawulf hires JP Morgan and Morgan Stanley to raise project finance for data center project in Lake Mariner, NY

TeraWulf has engaged JP Morgan and Morgan Stanley to launch a project finance deal aimed at raising debt to back its project in Lake Mariner, New York.

The Maryland-based digital infrastructure firm plans to begin work on the financing deal in 1Q25, with plans to use proceeds to back-lever the project, which was funded with Terawulf equity, executives said on an analyst call today.

TeraWulf today announced a lease agreement for the data center project with Core42, a subsidiary of G42, which is backed by Mubadala, a UAE sovereign wealth fund. The initial lease covers 72.5 MW of gross capacity (60 MW critical IT load), with an option to expand to 135 MW gross (108 MW critical IT load).

Core42 will handle GPU and associated hardware supply, while TeraWulf will manage infrastructure, including operational and power costs.

On the analyst call, executives from TeraWulf further detailed the economics of the deal: revenues will be USD 1.5m per MW annually, or $125 per kW per month, with a 3% annual escalator; and EBITDA per MW is estimated at USD 1.05m annually, representing a 70% EBITDA margin.

Meanwhile, a capex estimate of between USD 6m – USD 8m per MW, and a Power Usage Effectiveness of 1.25 leads to an unlevered yield on the project of 17 – 18%. After accounting for project-financing debt, the levered yield climbs to the “mid to high 20s,” the company said.

The 10-year initial lease term with two 5-year extensions ensures predictable, long-term cash flows, the executives said. Additionally, a 12-month revenue prepayment from Core42, credited back over time, provides immediate liquidity.

The deal represents a strategic move for TeraWulf as it transitions from Bitcoin mining to high-performance computing (HPC) for AI workloads. The company plans to develop 500 MW of AI compute capacity over the next three to three-and-a-half years, targeting approximately 100-150 MW annually.

TeraWulf’s recent sale of its stake in the Nautilus project to Talen Energy along with a recent convertible notes financing deal provided equity funds for the project.

CEO Paul Prager emphasized that the project finance structure mirrors his team’s extensive experience in the power industry, drawing parallels to securing long-term off-takers, managing infrastructure, and achieving predictable returns.

Prager highlighted the unique value of TeraWulf’s location, particularly access to low-cost, predominantly green power in New York’s Zone A, which positions the company as a sustainable and scalable digital infrastructure provider.

The company also outlined plans to potentially transition into a Real Estate Investment Trust (REIT) as its business scales.

CFO Patrick Fleury noted that the timing of the REIT transition would coincide with TeraWulf’s shift from a non-taxpayer to a taxpayer status, leveraging its significant net operating loss carryforwards (NOLs). This transition, likely after substantial free cash flow generation over the next three to four years, aligns with the next Bitcoin halving cycle.

TeraWulf equity dropped over 12% following the news, trading at USD 5.78 per share and a USD 2.2bn market cap.

*Please note this story is part of NPM’s US Data Center’s coverage, which will be a separate comprehensive content set launching in 1Q25. Please contact help@newprojectmedia.com or your account manager for more details or to trial our Data Center’s coverage once released.

*This story was originally published exclusively for NPM subscribers.

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