HIVE Digital Signs Agreement to Develop 100 MW Hydroelectric Data Center in Paraguay, Targeting to Reach 12 Exahash Next Year

Rhea-AI Summary

HIVE Digital Technologies has entered into definitive agreements for a 100 MW digital asset mining operation in Paraguay, utilizing green energy from the Itaipu hydroelectric dam. The company aims to increase its global Bitcoin mining capacity to 12.1 EH/s. However, HIVE has reduced its initial investment plans due to a proposed 14% energy tariff increase for Bitcoin data centers in Paraguay.

HIVE's President and CEO, Aydin Kilic, expressed pride in the acquisition of the 100 MW PPA, while Executive Chairman Frank Holmes emphasized the importance of stable fiscal policies for attracting foreign investment. The company's investment is expected to provide over $100 million in U.S. dollar revenue to Paraguay over three years, along with creating local jobs and infrastructure development.

Positive

• Acquisition of 100 MW PPA for Bitcoin mining in Paraguay using green hydroelectric energy
• Planned increase in global Bitcoin mining capacity to 12.1 EH/s
• Expected to provide over $100 million in U.S. dollar revenue to Paraguay over three years
• Creation of local jobs and infrastructure development in Paraguay

Negative

• Reduction in initial investment plans due to proposed 14% energy tariff increase for Bitcoin data centers
• Uncertainty in long-term investment decisions due to potential energy cost increases
• Delay in HPC data center strategy implementation with Nvidia GPU chips for AI

Insights

Financial Analyst

The agreement for a 100 MW hydroelectric data center in Paraguay represents a significant expansion for HIVE Digital Technologies. This move could potentially double their Bitcoin mining capacity to 12.1 EH/s, a substantial increase that could positively impact their revenue and market position. However, the company's decision to cap investment at 100 MW, down from initial plans for 250 MW, signals caution due to fiscal policy changes in Paraguay.

The proposed 14% energy tariff increase for Bitcoin data centers in Paraguay is a critical factor affecting HIVE's investment decisions. This unexpected policy shift highlights the importance of stable regulatory environments for capital-intensive projects in the cryptocurrency mining sector. The reduced investment scope from $250 million to approximately $100 million over three years demonstrates how policy uncertainty can significantly impact foreign direct investment.

From a financial perspective, the project still offers potential benefits:

• Stable U.S. dollar revenue for Paraguay's government-owned utility
• Approximately $16 million investment in local electrical infrastructure
• Creation of local jobs, including 80 construction workers initially

However, the 36% depreciation of the Paraguayan guaraní against the U.S. dollar over five years underscores the country's need for stable foreign investments. HIVE's cautious approach aligns with other public Bitcoin mining companies, reflecting industry-wide concerns about policy stability in Paraguay.

For investors, this news presents a mixed outlook. While HIVE's expansion plans demonstrate growth potential, the scaled-back investment due to policy uncertainties highlights the risks associated with the volatile regulatory landscape in the cryptocurrency mining sector. Shareholders should closely monitor how HIVE navigates these challenges and whether it can achieve its targeted hash rate increase despite the reduced investment scale.

Energy Policy Expert

HIVE's agreement to develop a 100 MW hydroelectric data center in Paraguay highlights the complex interplay between renewable energy, cryptocurrency mining and national energy policies. The use of clean energy from the Itaipu hydroelectric dam aligns with the growing trend of "green" Bitcoin mining, potentially improving HIVE's environmental credentials.

However, the proposed 14% energy tariff increase specifically targeting Bitcoin data centers raises significant concerns about energy policy consistency and fairness. Such discriminatory policies can deter foreign investment and technological advancement in emerging economies like Paraguay. The situation underscores the need for balanced, transparent and stable energy policies that can attract long-term investments while ensuring fair returns for national utilities.

The reduction in HIVE's investment plans from 250 MW to 100 MW illustrates the direct impact of energy policy uncertainty on foreign direct investment. This scenario serves as a cautionary tale for other countries seeking to attract cryptocurrency mining operations, highlighting the importance of predictable and equitable energy pricing structures.

From an energy policy perspective, Paraguay's approach appears short-sighted. While the proposed tariff increase might yield short-term revenue gains, it risks deterring long-term investments that could contribute to grid stability, infrastructure development and economic growth. The potential loss of stable U.S. dollar revenue and infrastructure investments could outweigh the benefits of higher energy tariffs.

Moving forward, Paraguay and other countries looking to capitalize on the cryptocurrency mining boom should consider more collaborative approaches. This could include:

• Developing long-term energy contracts with predictable pricing structures
• Implementing gradual, transparent tariff adjustments
• Creating incentives for miners to use excess renewable energy during off-peak hours
• Fostering partnerships that contribute to local infrastructure and workforce development

Such strategies could help balance national interests with the needs of energy-intensive industries like cryptocurrency mining, fostering sustainable economic growth and technological advancement.

Cryptocurrency Mining Analyst

HIVE's agreement to develop a 100 MW hydroelectric data center in Paraguay marks a significant move in the competitive landscape of Bitcoin mining. The potential increase to 12.1 EH/s would position HIVE as a major player in the industry, potentially rivaling some of the largest mining operations globally.

However, the decision to scale back from the initial 250 MW plan to 100 MW due to policy changes reflects the volatile nature of the cryptocurrency mining sector, particularly in emerging markets. This cautious approach is prudent given the industry's sensitivity to energy costs and regulatory environments.

The use of hydroelectric power is a strategic choice, aligning with the growing emphasis on sustainable mining practices. This could provide HIVE with a competitive advantage as investors and regulators increasingly scrutinize the environmental impact of cryptocurrency mining.

The proposed 14% energy tariff increase in Paraguay highlights a critical risk factor for mining operations: policy instability. Such changes can dramatically affect the profitability of mining operations, given that electricity costs typically account for a significant portion of operational expenses. HIVE's response to this challenge demonstrates the need for flexibility and diversification in site selection for mining operations.

From an industry perspective, HIVE's experience in Paraguay serves as a case study for other mining companies considering expansion into new territories. It underscores the importance of:

• Thorough due diligence on local energy policies and their stability
• Flexibility in investment plans to adapt to changing conditions
• Building strong relationships with local authorities to navigate policy changes
• Diversifying operations across multiple geographies to mitigate country-specific risks

The broader implication for the Bitcoin mining industry is the ongoing challenge of finding stable, low-cost energy sources in jurisdictions with favorable regulatory environments. As more countries recognize the potential economic benefits of hosting mining operations, competition for these investments may lead to more attractive and stable policy offerings in the future.

For HIVE and its investors, the key metrics to watch will be the actual hash rate increase achieved, the timeline for the new facility's completion and the impact on overall operational costs. These factors will determine whether the scaled-back investment in Paraguay will deliver the anticipated benefits to HIVE's mining capacity and profitability.

Vancouver, British Columbia--(Newsfile Corp. - July 31, 2024) - HIVE Digital Technologies Ltd. (TSXV: HIVE) (NASDAQ: HIVE) (FSE: YO0) ("HIVE" or the "Company" ), a leading digital asset miner and "green"-focused data center builder and operator, announces that, further to its news release of July 22, 2024, it has entered into definitive agreements (the "Agreements") for the development of a 100 megawatt ("MW") digital asset mining operation in Paraguay. The Agreements are composed of: (i) a share purchase agreement (the "SPA") among Paraguay Digital Ltd. ("HIVE Paraguay"), a wholly-owned subsidiary of the Company, and the owners of W3X SA ("W3X" or the "Target"); and (ii) a construction agreement (the "Construction Agreement") among the newly acquired Company, W3X SA ("W3X"), and an experienced local contractor (or the "Contractor") (all amounts in US dollars, unless otherwise indicated).

Aydin Kilic, President and CEO of HIVE, stated: "We are proud to announce the acquisition of a 100 MW PPA in Paraguay, utilizing green and clean energy sourced from the Itaipu hydroelectric dam. Our team is hard at work to design and commence building an additional 6.5 Exahash per second (EH/s) Bitcoin mining infrastructure, increasing our global EH/s to 12.1 EH/s." However, we have capped our investment at 100 MW after turning down an additional 150 MW due to unexpected fiscal policy changes. Like many other public miners, we will explore other countries that offer stable capital for key electrical infrastructure, data centers for the global digital economy, U.S. currency income, and transparent fiscal agreements.

Frank Holmes, Executive Chairman of HIVE, stated: "Stable fiscal policies are crucial in attracting and maintaining continued foreign direct investment from public companies and U.S. institutional investors. We will continue to advocate for fair treatment for the data center and Bitcoin mining industries, as we have been doing across Canada, the United States, and Sweden. Data centers in Paraguay act as a currency hedge by bringing the government-owned utility millions of stable U.S. dollar revenue monthly. When they are public companies and institutional funds, they have a multifaceted, long-term vision for both their shareholders and to contribute to regional growth and development, providing meaningful employment opportunities, governance, transparency, and fostering education and needed data center skill development for the global digital economy."

Strategic Investment Plans for Paraguay

HIVE clarifies its strategic investment plans for Paraguay in response to the recent proposal to impose a discriminatory 14% energy tariff increase on Bitcoin data centers.

Mr. Holmes continued, "While we are excited about the opportunities in Paraguay, the proposed energy tariff hike creates uncertainties that impact our long-term investment decisions. We have communicated our concerns with the government and look forward to ongoing discussions to address these challenges. Stable costs and reliable agreement durations are vital to attract foreign public funds. We hope the Government will address these policies to ensure continued investment."

After constructive meetings with key Paraguayan officials in May, HIVE initially planned larger foreign direct investments (FDI), including acquiring land and negotiating PPAs for two potential projects of 100 MW each and another for 50 MW. This investment was anticipated to exceed $250 million, reflecting HIVE's confidence in Paraguay's vision and leadership. However, the proposed 14% energy tariff increase, combined with short-term contract durations and a lack of clarity on energy pricing, has led to a reduction in our investment and a delay in our HPC data center strategy with our suite of Nvidia GPU chips needed to participate in the AI boom.

A 100 MW project needs to attract substantial Foreign Direct Investment into Paraguay and provide essential capital to convert high-voltage electricity into usable power for manufacturing and households. Electricity payments from HIVE would provide a stable U.S. dollar benefit exceeding $100 million over three years, offering reliable monthly income in addition to assisting in building out the electricity infrastructure. This provides a synthetic U.S. dollar hedge that banks couldn't match. Further, the cost of the required electrical infrastructure for stepping down from high voltage power for industrial and residential use is estimated to be around $16 million creating local jobs. Today, our local contractor said we will soon be mobilizing around 80 construction workers for the initial work.

The Paraguayan guaraní has depreciated approximately 36% against the U.S. dollar over the past five years and about 16% in the past year, supporting the importance of stable foreign investments and U.S. Dollar income for Paraguay's economic stability and growth.

Mr. Holmes highlighted as a global money manager: "Research supports the fact that increased electrical infrastructure drives faster economic growth. Studies by the World Bank and the IEA emphasize that investments in electricity infrastructure are crucial for economic development, enhancing productivity, industrial growth, and quality of life."

HIVE is not alone in its cautious approach. Other public Bitcoin mining companies gathered at the largest Bitcoin conference last week in Nashville and said they are similarly reassessing their investment plans in Paraguay due to the proposed tariff increase and contract constraints. This collective response at the conference in Nashville, where former President Trump and Robert F. Kennedy Jr. both endorsed the importance of Bitcoin and Bitcoin mining in their political campaign for the US Presidential election this year, only illustrates the need for stable government fiscal policies to attract and sustain crucial foreign capital investments from public mining companies and institutional funds.

HIVE's approach, based on a transparent 'Return on Invested Capital' (ROIC) model, supports sustainable investment and community engagement, as evidenced by our successful operations in Sweden and Canada. We value the opportunity to contribute to Paraguay's economic growth and remain committed to fostering a conducive environment for business and investment.

About HIVE Digital Technologies Ltd.

HIVE Digital Technologies Ltd. went public in 2017 as the first cryptocurrency mining company listed for trading on the TSX Venture Exchange with a focus on sustainable green energy.

HIVE is a growth-oriented technology stock in the emergent blockchain industry. As a company whose shares trade on major stock exchanges, we are building a bridge between the digital currency and blockchain sector and traditional capital markets. HIVE owns and operates predominantly green energy-powered data centre facilities in Canada, Sweden, and Iceland, where we endeavour to source green energy to mine digital assets such as Bitcoin on the cloud. Since the beginning of 2021, HIVE has held in secure storage the majority of its treasury of BTC derived from mining rewards. Our shares provide investors with exposure to the operating margins of digital currency mining, as well as a portfolio of Bitcoin. Because HIVE also owns hard assets such as data centers and advanced multi-use servers, we believe our shares offer investors an attractive way to gain exposure to the cryptocurrency space.

Environmental Sustainability:

• Green Energy: By sourcing green renewable energy, HIVE is committed to environmental responsibility, positioning itself as a leader in sustainable cryptocurrency mining.

• Competitive Advantage: We believe this environmentally conscious approach sets HIVE apart from competitors and aligns with evolving investor preferences.

Expansion into AI Strategy:

• Diversification: HIVE's diversification into HPC enables us to support artificial intelligence (AI) using Nvidia GPU chips, showcasing our adaptability and innovation beyond traditional Bitcoin mining.

• Revenue Streams: This strategic move into HPC broadens HIVE's revenue streams and places it at the forefront of technological advancements in both cryptocurrency and AI industries.

HIVE's unique value proposition encompasses efficient operations, a proven agile management team, financial strength, environmental sustainability, and innovative expansion strategies. Beyond Bitcoin mining, HIVE is firmly part of the global boom in data center infrastructure, sourcing primarily green renewable energy.

HIVE presents a unique growth opportunity with over 2,500 Bitcoins on its balance sheet and growing revenue from its suite of Nvidia GPU chips powering data services for the AI revolution.

We encourage you to visit HIVE's YouTube channel here to learn more about HIVE.

For more information and to register to HIVE's mailing list, please visit www.HIVEdigitaltechnologies.com. Follow @HIVEDigitalTech on Twitter and subscribe to HIVE's YouTube channel.

On Behalf of HIVE Digital Technologies Ltd.

"Frank Holmes"
Executive Chairman

For further information please contact:
Frank Holmes
info@hivedigitaltech.com

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.

Forward-Looking Information

Except for the statements of historical fact, this news release contains "forward-looking information" within the meaning of the applicable Canadian securities legislation that is based on expectations, estimates and projections as at the date of this news release. "Forward-looking information" in this news release includes information about: business goals and objectives of the Company; the completion of the site selection, facility construction, power contracts and related transactions contemplated to construct a 100 MW Hydroelectric Data Center in Paraguay, including the receipt of all required regulatory approvals; the benefits of geographical diversification and the ability to operate the business in Paraguay on terms which are economic or at all; the acquisition, deployment and optimization of the mining fleet and equipment; the continued viability of its existing Bitcoin mining operations; the Company's program to build a high-performance computing business offering cloud computing services; the Company's operations and sustainable future profitability; potential further improvements to the profitability and efficiency across mining operations by optimizing cryptocurrency mining output, continuing to lower direct mining operations cost structure, and maximizing existing electrical and infrastructure capacity including with new mining equipment in existing facilities; continued adoption of Bitcoin globally; the potential for the Company's long term growth; the business goals and objectives of the Company, and other forward-looking information includes but is not limited to information concerning the intentions, plans and future actions of the parties to the transactions described herein and the terms thereon.

Factors that could cause actual results to differ materially from those described in such forward-looking information include, but are not limited to: the inability to complete and conduct operations in Paraguay on terms which are economic or at all; the volatility of the digital currency market; the Company's ability to successfully mine digital currency; the Company may not be able to profitably liquidate its current digital currency inventory as required, or at all; a material decline in digital currency prices may have a significant negative impact on the Company's operations; the Company's ability to compete successfully with other cloud computing service providers; the regulatory environment for cryptocurrency in Canada, the United States and the countries where our mining facilities are located; economic dependence on regulated terms of service and electricity rates; the speculative and competitive nature of the technology sector; dependency on continued growth in blockchain and cryptocurrency usage; lawsuits and other legal proceedings and challenges; government regulations; the global economic climate; dilution; future capital needs and uncertainty of additional financing, as well as capital market conditions in general; risks relating to the strategy of maintaining and increasing Bitcoin holdings and the impact of depreciating Bitcoin prices on working capital; the competitive nature of the industry; currency exchange risks; the need for the Company to manage its planned growth and expansion; the effects of product development and need for continued technology change; the ability to maintain reliable and economical sources of power to run its cryptocurrency mining assets; the impact of energy curtailment or regulatory changes in the energy regimes in the jurisdictions in which the Company operates; protection of proprietary rights; the effect of government regulation and compliance on the Company and the industry; network security risks; the ability of the Company to maintain properly working systems; reliance on key personnel; global economic and financial market deterioration impeding access to capital or increasing the cost of capital; share dilution resulting from equity issuances; the construction and operation of facilities may not occur as currently planned, or at all; expansion may not materialize as currently anticipated, or at all; the digital currency market; the ability to successfully mine digital currency; revenue may not increase as currently anticipated, or at all; it may not be possible to profitably liquidate the current digital currency inventory, or at all; a decline in digital currency prices may have a significant negative impact on operations; an increase in network difficulty may have a significant negative impact on operations; the volatility of digital currency prices; the anticipated growth and sustainability of electricity for the purposes of cryptocurrency mining in the applicable jurisdictions; the inability to maintain reliable and economical sources of power for the Company to operate cryptocurrency mining assets; the risks of an increase in the Company's electricity costs, cost of natural gas, changes in currency exchange rates, energy curtailment or regulatory changes in the energy regimes in the jurisdictions in which the Company operates and the adverse impact on the Company's profitability; the ability to complete current and future financings, any regulations or laws that will prevent the Company from operating its business; historical prices of digital currencies and the ability to mine digital currencies that will be consistent with historical prices; an inability to predict and counteract the effects of pandemics on the business of the Company, including but not limited to the effects of pandemics on the price of digital currencies, capital market conditions, restriction on labour and international travel and supply chains; and, the adoption or expansion of any regulation or law that will prevent the Company from operating its business, or make it more costly to do so; and other related risks as more fully set out in the Company's disclosure documents under the Company's filings at www.sec.gov/EDGAR and www.sedarplus.ca.

The forward-looking information in this news release reflects the current expectations, assumptions and/or beliefs of the Company based on information currently available to the Company. In connection with the forward-looking information contained in this news release, the Company has made assumptions about the Company's ability to realize operational efficiencies going forward into profitability; profitable use of the Company's assets going forward; the Company's ability to profitably liquidate its digital currency inventory as required; historical prices of digital currencies and the ability of the Company to mine digital currencies will be consistent with historical prices; and there will be no regulation or law that will prevent the Company from operating its business. The Company has also assumed that no significant events occur outside of the Company's normal course of business. Although the Company believes that the assumptions inherent in the forward-looking information are reasonable, forward-looking information is not a guarantee of future performance and accordingly undue reliance should not be put on such information due to the inherent uncertainty therein. The Company disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, other than as required by law.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/218447

FAQ

What is HIVE Digital's new Bitcoin mining capacity target for next year?

HIVE Digital is targeting to reach 12.1 Exahash per second (EH/s) in global Bitcoin mining capacity next year, an increase of 6.5 EH/s from their current capacity.

How much power capacity has HIVE Digital secured in Paraguay?

HIVE Digital has signed an agreement to develop a 100 megawatt (MW) digital asset mining operation in Paraguay, utilizing green energy from the Itaipu hydroelectric dam.

What is the main challenge HIVE Digital faces with its Paraguay investment?

The main challenge is a proposed 14% energy tariff increase for Bitcoin data centers in Paraguay, which has led HIVE to reduce its initial investment plans and reconsider long-term investment decisions.

How much U.S. dollar revenue is HIVE Digital's investment expected to bring to Paraguay?

HIVE Digital's investment is expected to provide over $100 million in U.S. dollar revenue to Paraguay over a three-year period.