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cash price still an absolute dumpster fire i think when i recorded yesterday the absolute low down
here was 2789 and now we're just above 30 again with that being said um today we're speaking to
spencer ma of sankhar renewables i hope i pronounced that right he can correct me just now
where they recently announced a 20 megawatts solar mining project.
And especially with the current hash price environment as a backdrop,
that is a very interesting thing to talk about.
With all of that being said, Spencer, welcome to the show.
Thank you for your time. How are you doing?
I'm doing well. Thank you for having me.
It's an interesting time to have this conversation.
yeah what makes it interesting from your perspective yeah obviously uh you know when
bitcoin price starts careening down and hash price goes along with it though of course not
not quite as precipitously uh it doesn't make anyone feel good it's not uh confidence inspiring
uh but it also as we as a team internally have been thinking about this of course all week it's
It has everyone's attention.
We also see some silver linings.
So in our case, and I'm sure this is what we're going to get into, we feel like we took a long time to get this current project with Total Energies off the ground.
And over the course of putting the deal together, as much focus as there was on really the energy rate procurement piece, as much if not more went into business model.
And so we've designed a really lean project finance approach towards capitalizing and operating Bitcoin mining assets.
So a lot of our, you know, when times are good, it's easy to mask mistakes that people are making.
But we feel like, you know, being in this down market and we'll see how long it lasts is actually kind of proving or validating some of our some of what we've been selling investors on for a long time,
which is really that our business model and our procurement strategy are designed to be flexible and provide us a limit to the to the downside.
And so even now, as part of part of what we're thinking through is like if the economics of mining Bitcoin were to never get better than they are today,
are we still cash flow positive? Can investors still generate a return?
And the answer, at least right now, is yes.
So, you know, there's reasons for that, that we can explore.
But yeah, that's the silver lining of the moment.
So I guess to answer your question, it's because in both directions, you have the downside of, of course, we all wish we were at hash price 100.
But over the long run, we feel like our views and our thesis and business model will kind of shine even more as we come out of this.
All right. Give people a 30-second rundown, Spencer, of your time in Bitcoin mining.
we talked a bit before you've been around the block as well i just give people some context
since you're a new character on the show sure sure so um my background was as a lawyer for about five
years i left legal practice to get into renewable public policy in uh 2016 2017 working for the city
of New York in 2017 because I'm class of 2017.
So I saw as Bitcoin went to 20,000 at the time, which is a big, exciting thing.
I was working in a pretty interdisciplinary environment with engineers and power markets
people.
And I had learned enough to be dangerous about the problems of power marketing and renewable
energy project finance.
And so I had this basic idea, light bulb moment of, could we use Bitcoin mining as a force multiplier to turn around economics on renewable projects facing congestion, curtailment, negative pricing?
I'm saying all this now as if my phrasing then might have been different because I didn't know.
It was just a basic go.
Renewable energy bad, Bitcoin mining good.
Let's figure out how to use the two together.
I tried in 2018 to pursue co-location with some large renewable assets, particularly wind.
It was just too early in every way.
The idea of institutional grade Bitcoin mining didn't exist.
There wasn't a single publicly traded mining firm at the time.
Credit profile, deal structuring, it was never going to happen.
And so by 2018, back then we had a company called Sangha Systems, which is a bit of a predecessor company.
We wound up developing and operating and then ultimately selling just a pure grid-tied site about two hours west of Chicago in a town called Hennepin, Illinois.
And it was in that time that, you know, the Bitcoin mining industry really blew up.
You know, you started having these huge conferences, institutional capital flowing into the space.
But we were then and still are a pretty lean team.
So it's not like we could expand beyond the one site.
It was a large site in Hennepin, 80 megawatts.
And so when we sold in 2022, we were excited to kind of take a lot of what we were learning and put it in practice.
The big one really, like the sort of macro thing that we observed was our ability to develop institutional capacity, logic, financial modeling, software, hardware, you name it.
That would say, okay, any given five minute energy trading interval we can develop if we know hash price and we know the efficiency of our ASICs, we have a strike price, right?
This is now well understood back then.
We were kind of new to it.
We felt like we were at the vanguard. And so we said, well, could we put together renewable projects that take advantage of this insight?
And so, but we couldn't do it until we sold. So we sold in July 2022 and then came back full force with a specific and exclusive focus on originating sites through distressed renewables.
And then from late or so, let's say from 23, late early 2023 to late 2024, it was a lot of trying on different business model ideas that went from a core focus for a while on convincing large renewable independent power producers that they should be the Bitcoin miner and we would build it and operate it for them.
That actually did have some traction, but ultimately the crypto went through then made it a bit difficult.
And ultimately our business model settled on what it is today, which is we use our company, Sanger Renewables or Sanger Development, as a development platform, similar to like real estate finance or renewable energy project finance,
whereby we use our development company
to originate discrete project level financings
where we then, once the project matures to a certain point
and it's ready to be capitalized,
we take an investment directly at the project level.
So the balance sheet, the P&L, the assets,
all of it is held at the project level.
And our company, this has allowed us to be really efficient.
We take some fees that really are a function
of the profitability of the underlying cash flows. And that has forced us to become extremely
disciplined around making sure that we're always cash flow positive, right? We're not playing
a stock market, stock price appreciation game. We're really playing an IRR game.
And so, you know, especially in times like this, you know, you have to be able to think through
margin per megawatt hour. And then for us, as we grow into a portfolio of sites, so we think about
margin per megawatt hour and all the adaptive strategies necessary to maximize that. And then
as a company, as an enterprise, as a platform, how many megawatts under management can we get?
So we're leveraging the strong momentum coming out of this 20 megawatt project with Potala
energies into conversations with essentially like all of the large renewable power producers
globally, not even just in the US, a massive portfolio of megawatts under management,
all applying the same logic of being extremely disciplined on the cash flows.
So we're excited to share that Sanger Renewables 20 megawatts facility in West Texas is now
fully energized, developed behind the meter at a solar site and supported by energy partners,
including Total Energies and Lynx Energy Partners.
This project demonstrates a practical model
for monetizing renewable generation using Bitcoin mining.
Can you tell me more about these two entities?
You mainly mentioned Total Energies
and what kind of their problem is today
and how you're solving it?
Sure, sure, sure.
I'll start with, we say Total Energies
because it's a French company.
so Total Energies is a top 10 energy conglomerate globally they were traditionally an oil and gas
company and then over the last you know let's say 10 to 20 years especially in the U.S. have
really gotten into the power business so with they own a fairly large portfolio of renewable
generation of physical power plants in the U.S. and around the world. And then they also serve
that portfolio in their capacity as traders and retail energy market participants.
So they have sort of every part of the energy business conglomerated into their overall
parent company. They, in this case, at the asset called Oberon that we're talking about,
they own 150 megawatt operating solar facility. That facility, given its location and sort of the
dynamics of the West Texas power market it a strong asset has a lot of solar production But as is the case with a lot of these assets a fair amount of the time their nodal pricing which is where you know they able to mark to market their energy just trades negative or at just a very low price
So when we started conversations with them, the idea was, could we use both the co-location at the physical asset behind the meter, literally physically behind the meter on a parcel of land that's directly adjacent to the solar facility?
And could we use their teams, retail energy trading and other energy service, you know, capabilities to put the appropriate regulatory, commercial and engineering sort of wrap around this project.
And it was new for everyone. You know, there's a few people in the market doing something similar, but it's, you know, you can't point to a large volume of projects like this.
So it was a rather intensive collaboration where, you know, every day between the legal teams, regulatory teams and, you know, the analysts and traders, we had to think through a lot of dimensions to what does this really look like?
And it took us about 18 months from the time that we, I think, signed a term sheet till we actually went live.
And all the way, we were just kind of chugging along on our side to ensure that we were capitalizing the project the right way and setting up sort of an LLC structure that allowed us to get the project off the ground and, you know, very, very effectively with a low cost of capital.
So Lynx Genco, Lynx Energy Partners are actually a group that we co-develop with.
So they're on our side of the equation.
I can't say enough about them.
They effectively, Lynx and Sangha are in many ways with respect to these projects, at least fully partnered, effectively one in the same team.
So Lynx is a group of about six partners and some analysts that have many years of experience in, let's just say, energy markets.
And so they helped us really on the fine grain aspects of the commercial negotiations with Total.
And we are working every day with Lynx right now to have a similar conversation to all the rest of the large renewable IPPs out there.
Okay, so to break it down a bit more simply, what you're saying effectively is, you know, you're giving Total Energies a hedge on how much they can monetize their kilowatt hours for.
And whenever market conditions are, well, favorable to mine Bitcoin instead of selling it to the grid, they have an option to do that.
Would you agree with that sort of summary?
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There are parts of the deal that you could say look like a hedge in nature.
I think the core of the deal, maybe I wouldn't use the word hedge, I'd use the word floor.
That is the word that we actually use in the actual documents.
So yeah, I mean, I have to break it down without getting too in the weeds about it.
You could think of it as there's three buckets of how we buy energy.
The first is from a floor down to negative infinity.
So we just index what we buy the energy for to the real-time energy market.
And we put a floor in place.
I won't say what that is, but there's a floor in place so that anytime there's a 15-minute energy settlement interval that settles at the floor or below, it could get negative infinity.
Of course, it never goes to negative infinity, but negative 20, negative 30, which happens.
We're buying it up to that floor price. So the core value proposition to Total was really the uplift they get by eliminating the exposure below the floor.
Between the floor and our break even strike price in dollars per megawatt hour, we're just buying at the market.
So it's the same kind of exposure they have when facing the ERCOP merchant market.
And then when our break-even, which at the moment is much lower than it was a few months ago, when our break-even is surpassed by the real-time price, we're simply turning off the load and Total is able to push those electrons into the open market.
Right. So if we look at you guys basically being that additional tool, give viewers a bit of context, you know, over the last year, over the last couple of months, how much uptime did you guys see? How much was that tool actually utilized? And what machine choice goes along with that?
Yeah, so we spend an inordinate amount of time mapping our expectations for uptime, which is, of course, a function of the way we think about hash price and then how hash price equates to a strike price and how does that strike price actually play out in the real-time energy market.
So we went live in late November around Thanksgiving time.
And in that time, what we've observed is that, of course, this is a period of time in which our strike price is considerably low.
So with hash price, given the machines that we're using, which average out to about roughly call it an 18 and a half tools per tera hash, where we're looking at in today's terms, we're looking at a strike price of around $70 a megawatt hour.
If I can remember all the way back to early December, that was probably closer to 85 or 90.
And if I think back to last summer, we were probably at like 120.
um so really price quickly spencer explain the strike price to the viewers that don't understand
sure sure sure it's it's it's a fairly simple thing if you have your hash price which is the
revenue you know the commodity value of your revenue in it's just the unit adjustment so you
say that's in um you know uh dollars per terahash per day if i know that and i know the number of
units of energy that go into that equivalent amount of compute, and I take my hash price and
I divide it into the number of megawatt hours I need to use to generate that amount of hash price,
then now I have a dollar per megawatt hour strike price. And now that's what allows us to perform
an arbitrage between revenue and cost. And so what we then do is we're just looking at actually
every five minute interval, there's price discovery in the ERCOT merchant market.
So we have various software and APIs and firmware that allow us to take a feed of the real-time
strike price and a feed of the real-time cost. And we have an overlay and an algorithmic approach
to allow us to turn off when we're functionally underwater on a dollar per megawatt hour,
over dollar per megawatt hour basis. And so actually a conversation I have more and more
with the energy companies, because it's vital to thinking through how do we actually put together
the energy procurement, is that we try to explain that we're not really, sometimes as a shorthand
in the past, I would say something to the effect of, we're really looking for access to a site
that allows us to get to 95% uptime at $35 a megawatt hour all in or less. And those are both
annualized figures. It turns out more recently, I realized that while shorthand is good because it
allows you to communicate efficiently, it also kind of led to certain misunderstandings. And so
the way I would describe it now, it's a bit more nuanced, is that what we're really solving for
is that we need to see in our underwriting, which is a function of we look at pricing,
both historically and on a forward-looking basis, and levels of actual production from the asset
that would allow us to convince ourselves, underwrite for ourselves, that there's a sufficient
volume and magnitude, or frequency, I should say, frequency and magnitude of profitable megawatt
hours. And from there, we're able to back into whether there's a risk-adjusted, attractive IRR
that we can bring capital into a deal. And so you had asked before which machines we're using.
We actually, we're using a blend. We're using hydro cooling all around because when you're
arbitraging, meaning curtailing and tuning the firmware as frequently as we are, we needed a
robust infrastructure. Otherwise, you know, in an air-cooled environment, it's very physically
taxing to the machines to be going out and off so much. So we use hydrocooling.
Sorry, Spencer, to interrupt you there. Sorry. This is very important, right? Because everybody
thinks, oh, Bitcoin is still super flexible, right? But these machines, you have to keep in
mind, they're designed when they come out to run 100% of the time. They're not designed to be
constantly thermal cycling. So that's just important to note.
but that's right and so and and there's no perfect solution to it um but what what we tried to do
and we were willing we thought that it made sense um in the overall pro forma for how we
capitalize the project it was worthwhile to us to spend a little more on the capex
to get hydro cooling machines and hydro cooling infrastructure so that uh we could have more
reliable performance. So it allows us to overclock, it allows us to underclock, and allows us to tune
the machines much more rapidly to put the hydro cooling in. Even then, of course, nothing's
perfect, right? These are physical systems, you run into issues, sometimes it's the issues you
knew about, sometimes it's some things take you by surprise. And so, yeah, we went with GreenHash
are the containers we're using,
which is, you know,
hydro infrastructure And then about two of the machines that we using on are Watts Miner their hydro series the M63S And then more recently we brought the last third of the capacity on and we very pleased with this relationship
We see a long-term future in the relationship with actually Auradyne.
So Auradyne has some machines that are doing things a bit differently than the rest of the ASIC manufacturers.
in particular what really got us excited about them.
First of all, their team has been amazing to work with.
We're getting the attention of the senior team
and any questions we have,
any requests for additional features,
they've been very quick to respond.
And the key one is that they've enabled us
to rapidly tune.
So both on the up throttle and the down throttle
on ASIC performance,
we're seeing them come in at sub minute,
even sometimes sub 30 seconds, which is actually critical given that what we're trying to capture is the spread on energy, which trades pretty rapidly.
So that has actually significantly boosted our margin is the ability to really perform almost to the standard of like a battery system, you know, the ability to throttle up and down.
So briefly talk to me again, just very briefly, because you already said it's just critical to the next question on uptime.
What uptime are you targeting?
Yeah, we don't really target a specific uptime.
What do you expect?
Better word.
Yeah, well, I can't answer that simply
because it's fundamental to our design and our business model.
So I'll try to do it as briefly as I can,
but maybe we can go into this on a longer question format.
But essentially what we do is we've developed proprietary hash price forward curves, which are actually very similar to the way energy analysts would look at L&P forward curves in the energy markets, which you can look at a month out all the way to 10 years out.
And then you can extract some meaningful position about where you expect hash price to settle in any given hour going out 10 years.
What we're really looking for is to see that if we know that hash price or we can project that hash price in defensible, conservative ways will equate to an energy denominated strike price.
What we really just want to see is that that, again, is of a sufficient frequency and magnitude to generate an attractive return to our investors.
And these are project level investors.
So the whole thing in many ways is simplified to it costs us X hundreds of thousands or maybe into the millions, low, low single million per megawatt to physically build the facility.
And then we need to amortize that into all of the megawatt hours in which we would run.
And how often we would run and the margin within any single hour is a function of the energy forward curve overlaid against our own hash price forward curve.
And so the answer is it depends.
But to give you a range, to not completely wiggle out of the question, we're looking at certain assets right now that we can run exclusively behind the meter where we never import from the grid.
generally you can only do that with wind assets also hydro assets but hydro is kind of its own
thing so on wind assets for example we were we're close to getting to a term sheet on
a 200 megawatt wind facility where we offered to do 50 megawatts of mining and what we found is
that by downsizing the ratio i guess it increases the ratio but downsizing the mine relative so 50
megawatts against 200 megawatts of wind, we can sustain about somewhere between 70 and 75% uptime,
which generally would be too low for us. But the reason why in this case, it's acceptable is
because for those hours, for those megawatt hours, we're looking at like a $25 megawatt hour rate.
So the lower the rate, the more tolerance for a suppressed uptime. And then the last piece of
the equation that we spend just a tremendous amount of time modeling and thinking through is,
well, what's the combination of infrastructure and CapEx and development costs at which we feel like
that would generate an attractive return? So we kind of go into each project and we look at it
on a bespoke basis, whether we would go air-cooled or hydro-cooled, right? And we take all the
physical considerations in as well. And we're always talking to vendors to understand where
the latest technology is, which will actually perform the best. Can it perform for that specific
use case based on that specific energy procurement strategy? And at the other end of the spectrum is
what we have with Total, which of course, right now with hash price where it is, we're running at
less than 95% of the time. We're running at even right now, something like 85% of the time.
but we think over a long
over a 10 year horizon
which is what we underwrite for
we can achieve about a 90% uptime
with an all-in rate
which includes the energy commodity charges
what I'll call the wires charges
so payments to the utility
and taxes
we think we can come to about a 90% uptime
at about a 28 to $33
megawatt hour figure
fantastic
that's amazing
So the reason why I asked that question is, first of all, I really like that approach, which we see on more solar sites where you take, you know, higher efficiency machines, they turn on first, they respectively have a higher uptime.
And then you have sort of lower efficiency machines that turn on later and have less uptime hours, but still get the ROI done because they cost less initial investment.
So the question I have for you is, why not say to Total, look, we're only going to buy behind the meter.
Our uptime is probably going to be less than 50%.
And then we're buying used machines that are dirt cheap on the market, basically scrap value paperweights to make those ROIs insane, basically.
Why not do that?
yeah i mean i i think that actually if our underwriting uh believed that that was true
we probably would consider it i just i think we're dubious about whether the math actually
gets there some and it has it has to do with two things one is that you're still spending
no matter how lo-fi them you can you know you can talk about s9s or something um even with s9s
you're still having to sink the same amount of marginal CapEx into your infrastructure for your
electrical infrastructure. There's development costs, right? So it's not the amount we spend on
lawyers and engineers is not trivial. The amount we spend on civil, it all has to be done up to code.
So there's kind of like a minimum bogey just to get onto the site. And you're going to absorb that
no matter what into your marginal cost on your CapEx, like your cost per megawatt.
So you're already kind of you're already in a certain amount. And then the other thing is that, you know, I mean, on solar, it's quite difficult. Like the most you're ever going to do is the capacity factor of the solar itself, which means you're capped at.
it's really more like, again, you could downsize the mine relative to the size of the solar,
and maybe you could get up to like a 40% runtime. But now you're still going to have effectively a
cost on your nodal, if you're going to index that to the nodal cost, the nodal real time,
with where energy markets are right now, it's not like you're going to do that and get a one
cent rate or $10 megawatt hour rate. You're still going to get around, might be a little bit better
than the same 28 to 33 I just gave you, but maybe you're going to get $3 off, maybe it comes to 25
to 28. So now actually that lower strike price, because you have the NS9, I mean, S9, I haven't
checked in a while, but if I had to guess, NS9 is probably generating something like $20 a megawatt
hour gross.
Maybe less.
I don't even know.
Maybe.
Mental math.
I don't know.
It doesn't matter.
We get the point.
I was thinking of an S19.
An S9 is probably $7.
I can tell you
this
beauty right here.
This M30S.
Do you want to guess how much per kilowatt hour
it makes today?
I'm trying to remember the Jules per terahash on the M30.
Was it around?
It was like 38.
Yeah.
So, yeah, it's probably about 15 bucks.
Yeah.
No, it's actually 33 per megawatt.
Okay.
So, it's not too terrible.
But if my cost for the hours I run is already there, there's actually no margin in it.
No, I hear you.
I mean, what you're saying is, look, in the US, we have fixed cost irrespective of what machine we choose.
Yes, the ASICs make up the largest chunk of the CapEx overall.
But the part that's not variable, according to the machine, already makes the project, gets it to a certain base price.
And if we want to clear that, it doesn't make sense to use the old machines.
And then it makes more sense to buy power from the grid, get to 85, 90% uptime and just go that route.
I hear that, but it just means it's interesting.
It's an interesting thought because it means, you know,
countries like South Africa where I live,
where maybe the codes are less expensive to get to,
where certainly labor fees and lawyer fees are lower,
they actually have an advantage now because that fixed portion,
that fixed cost portion is way lower, right?
And I mean, you know, we would never install like AH3880 machines
from Auradyne at, I don't know, I don't know what you bought them at.
I remember four weeks ago, there were like 10,000 a pop.
And installed it here on a solar site in South Africa
where we have 30% uptime.
You're never going to see that because you can't make the money back.
That was just important for me to convey.
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Yeah, yeah.
I mean I be curious to look at the numbers on that I highly skeptical that you can really make it work anywhere with solar specifically because it just the nature of solar production
Solar has benefits that wind does not, in particular that it more predictably is producing,
at least in US markets where you have 4CP, 5CP, 12CP.
Generally, what you're going to find is that those peak intervals are being determined
during periods of time where you can run on the solar asset.
So just to speak to, I'm kind of naturally leading to a question that comes up a lot.
I'll give an answer, even though you didn't ask it, which is like, what are the benefits
of co-location with solar as opposed to just like a grid site?
And it's a few things.
And at various times, any one of these might feel like the more important one.
So one is just what we're specifically solving for and filtering for are sites that present
a negative node to load zone basis so that on an annualized, if you annualize it, the node should
trade at anywhere between $10 and $15 a megawatt hour cheaper than the load zone. And you can,
as a pure load serving substation at grid-tied site, the only way you can only buy at the load
zone or the hub, you can't get access to normal pricing unless you're co-located with a generator.
So that's 0.1, which is huge, $10 to $15 a megawatt hour is a gigantic advantage.
Of course, that's on a projected basis.
It's not every node.
We get really into the weeds there.
The other is that the shape of a solar production is exactly what I just said.
When the rest of the grid in ERCOT that's running just on a grid connection is curtailing in the peak of the summer because they're trying to avoid the 4CP tag,
We can actually avoid the 4CP tag because our net metering is still showing zero to ERCOT, but we're running.
We're just running on the solar resource.
So that's huge.
It gives us a gigantic leg up on mitigating our wire charges.
And then the third is the advantages from a speed to market and cost timeline in that we don't have to make any kind of major infrastructure improvements.
Of course, there's still some work we have to do to go from the existing substation, all the medium to low voltage work and all the civil and what have you.
But being able to piggyback on an IPP's existing physical and regulatory interconnection presents tremendous advantages in access.
Of course, you have to be a sophisticated, reputable player for them to be willing to allow you to come onto their site.
So that's one of the things that's exciting for us now is Total Energies is a very reputable, significant company. So the fact that we were able to get a deal done with a company of that stature speaks volumes to our credibility.
to close out um before we head into the rapid fire um question spencer explain to me how you
guys handled you know you said you're working a year on this deal first of all like what did
these initial conversations look like for a big global player like this getting into sort of
big combining and being affiliated number one and number two how do you navigate modeling when the
market over the course of the year changes completely yeah so i think we've seen we've
been working on this i think our first conversations with total uh were taking shape in
november 2023 so it's actually been a little over two years we went live almost exactly two years
after initial conversations and i think they were just sincerely curious um about like what is this
help us understand it. By then there were already some nascent examples of project formats that had
worked. So Luna had been working on a couple of deals that I think are public. There was
an Xterra deal with, I think it was initially maybe with Compute North and then it changed
to US Bitcoin. And now I think it's a marathon. So there were a few of these behind the meter
deals, but not many. And so we were lucky to have some personal relationships with the right
people at Tautologist, friends from college, that kind of thing. And they were able to at least get
us access to the data. And I would say the first six months were just education. It was just,
you know, it was education both about how Bitcoin mining works, what our economics look like,
what we could withstand, what we couldn't withstand. And just as much was an education
on who we are and why we should be trusted to operate a critical infrastructure at an asset
that they own. And so we just worked our way through and little by little, I think it was
just a learning process. I don't know that I could distill it to any one thing. I will tell you that
we were the agents of momentum because we had to be, we were really hungry for the deal.
Of course, Sotala is a gigantic company that has a lot of initiatives going on.
And as time went on, as they saw that we were able to hang, we have a really competent legal
team and Hush Blackwell has been a great firm for us. And we, you know, I think time and time again,
just given how new this stuff is, we kind of had to get out in front and say, guys, we think it's
this. Tell us if you think differently. But, you know, we think whether it's a regulatory question,
a pricing question, the answer should be should be this. And we work collaboratively. And over time,
I think Total felt the more kind of the American team, the U.S. Houston-based team that we were
dealing with that are, call it, like more sort of mid-level and, you know, various divisions
were willing to introduce us to the teams in France and in Geneva that are a bit more at the
sort of close to the executive level. And I just tried at every step of the way to be credible,
professional, serious, right? I spend a lot of my time thinking about how not to be perceived as
sort of a cowboy who's just trying to say that, you know, we're always going to go up and to the
right, which was like a lot of what was happening from 2019 to 2023, call it. And so we just try to
be a professional developer. It so happens that we deal with a new commodity asset class called
hash price. But we think there should be some sort of first mover advantage in so doing. And that
kind of feeds into an answer to your second question, which is like, how do we think about
a changing set of economics? I would say the answer to that question is probably the place
where if we have a secret sauce, it lies in the answer to that question. And I can say for now,
I mean, we could do a whole other hour on just breaking down, probably a few hours breaking down
exactly how we get there. But I think the insight is that we, so as a meaningful anecdotal point,
we're the first people we're aware of, certainly at any scale, and maybe literally the only people
to have convinced a traditional bank to give us long-term, whole project-backed,
low interest rate finance. And the way that we, and we, so from the beginning, we wrapped
our whole way of presenting the pro forma and the project model around the expectation of what would
a bank ask. And so you can't go in and present like a linear assumption on hash price to a bank
that the first thing they're going to do is say, this is not linear. So we thought through, I'll
just say for now, how to put a shape to a hash price forward curve, which is a distribution over
time that adequately represents the cyclicality and volatility of the underlying cash flows.
And then we also, that gives it kind of a relative distribution and a shape.
And then we're very serious about how conservative we are in saying that, yes, there's that shape
that plays out over time and across cycles, but the general trend line as you move out
in time is margin compression.
And so we said, as long as we can, within those parameters, still show that we can cover
our debt service and meet all of our covenants, then we've effectively financially engineered
all the exotic sexiness of it being Bitcoin out of the picture.
And this is just energy denominated cash flows against energy denominated revenue against
energy denominated cost.
And as long as you're smart about how you put like loan covenants together and you have
the right approach towards working capital and reserves and debt service reserves,
then we're never going to be exactly accurate in any given hour, quarter, or even year.
But in the aggregate over a 10-year term loan horizon, we should be directionally accurate.
Love that. Spencer, thank you so much for all this time and the level of transparency you have
given us. I could probably speak to you for another
hour.
Quick rapid fire round. Quick answers
only, as difficult as it might seem.
One word to describe the
project now that it's live.
Complicated.
Biggest assumption that turned
out to be wrong.
That we could move
the utility faster
than we could.
What one thing should future solar mining projects copy from you guys?
Project finance.
One thing that they should never copy.
Apologies to Total if they ever listen to me on this and they know I say it with love, but letting the trading team lead the way.
All right.
I love that.
Spencer, give people a handoff and where they can find more about you.
Sure. Just sangarenewables.com or on my LinkedIn, Spencer Marr.
I don't really do Twitter or anything.
So yeah, our website or LinkedIn.
Amazing. Cool.
All right, guys, I hope you learned something.
I know I have.
And whenever that happens, I know it was a quality episode.
Thank you so much, Spencer, for the education and the exchange.
I really loved it.
you have to come back at some point because i think i have a bunch more questions for you
with that being said you guys know how this works leave a like comment subscription
you know i have to say this the subscriptions are important why because it shows the sponsor that
this is valued content with that being said i hope you survive hash price um follow spencer's model
be very conservative about how you model you can only be surprised to the upside if it works at 25
it'll work at 45 that being said all the best cheers see you next time bye