TeraWulf Enters Into Long-Term Ground Lease at Lake Mariner Facility to Attract High-Quality Customers

Rhea-AI Summary

TeraWulf Inc. (Nasdaq: WULF) has announced a new long-term ground lease agreement at its Lake Mariner facility. This New Ground Lease replaces the original lease from May 2021 and supports the company's expansion into high-performance computing (HPC) and AI data centers. Key points include:

- Lease term extended to 35 years, with an option for an additional 45 years
- Land area increased by nearly 50%, from 107 to 157 acres
- Infrastructure capacity expanded to 750 MW
- No escalation in annual lease payments per acre compared to the original lease

The consideration for the new lease includes 20 million shares of TeraWulf's common stock and $12 million in cash. This primarily equity-based structure aims to align the interests of TeraWulf's CEO with the company's long-term goals.

Positive

• Extended lease term up to 80 years, providing long-term operational stability
• Increased land area by 50%, from 107 to 157 acres, allowing for expansion
• Expanded infrastructure capacity to 750 MW, supporting future growth
• No escalation in annual lease payments per acre compared to the original lease
• Equity-based consideration structure aligns CEO's interests with company goals

Negative

• Issuance of 20 million new shares, potentially diluting existing shareholders
• $12 million cash payment as part of the consideration, impacting cash reserves

Insights

Financial Analyst

This lease agreement is a strategic move for TeraWulf, significantly enhancing its long-term operational capacity and flexibility. The extension from 10 years to up to 80 years provides important stability for future planning and investment. Expanding the land area by 50% to 157 acres and increasing infrastructure capacity to 750 MW positions TeraWulf for substantial growth in high-performance computing and AI data centers.

The deal structure is noteworthy: $12 million in cash plus 20 million shares, with lock-up periods, aligns management interests with shareholders. However, the dilutive effect of issuing 20 million new shares (roughly 10% of outstanding shares) could pressure the stock price short-term.

While the expanded capacity and longer lease term are positive, the related-party nature of the transaction (with the CEO's company) requires careful scrutiny. The involvement of independent directors and fairness opinion mitigates some concerns, but investors should monitor for any conflicts of interest.

Real Estate Expert

This lease restructuring significantly enhances TeraWulf's real estate position. Extending the term to 35 years with a 45-year option provides exceptional long-term site control, critical for capital-intensive data center operations. The 50% increase in land area to 157 acres offers substantial room for expansion without the need for costly relocations.

Importantly, maintaining the per-acre lease rate without escalation clauses is a major win in today's inflationary environment. This fixed cost structure over such an extended period is rare and valuable, especially for energy-intensive operations like data centers.

The 750 MW infrastructure capacity is a game-changer, positioning TeraWulf to capitalize on the growing demand for high-performance computing and AI infrastructure. This power capacity is substantial and could support a world-class data center campus, potentially attracting major tech tenants and diversifying TeraWulf's revenue streams beyond cryptocurrency mining.

Extends Lease Term Up to 80 Years and Expands Land Area to 157 Acres, Increasing Infrastructure Capacity to 750 MW in Support of Future Growth

EASTON, Md., Oct. 10, 2024 (GLOBE NEWSWIRE) -- TeraWulf Inc. (Nasdaq: WULF) (“TeraWulf” or the “Company”), a leading owner and operator of vertically integrated, next-generation digital infrastructure powered by predominantly zero-carbon energy, today announced a new, long-term ground lease agreement at Lake Mariner (“New Ground Lease”) that supports the Company’s expansion into high-performance computing (HPC) and AI data centers and positions TeraWulf to attract long-term, high-quality customers.

The New Ground Lease with Somerset Operating Company, LLC (“Somerset”) replaces the original Lake Mariner lease, which was entered into in May 2021 and had ten years remaining. The New Ground Lease has a term of 35 years, with an option to extend for an additional 45 years, and increases the Lake Mariner land area by nearly 50%, expanding from 107 acres to 157 acres. Importantly, the New Ground Lease includes no escalation in annual lease payments on a per acre basis when compared to the original Lake Mariner lease and also grants TeraWulf exclusive access to infrastructure capacity of up to 750 MW, facilitating the Company’s future growth plans and value creation initiatives.

The New Ground Lease was negotiated and approved by the Audit Committee of the Company’s Board of Directors (the "Committee"), which is comprised of three independent directors. The Committee consulted independent legal counsel and the Company’s financial advisor, as Somerset is owned by the Company’s Chief Executive Officer. The Committee received an opinion from the Company’s financial advisor that the consideration to be received by the Company is fair, from a financial point of view, to the Company.

The consideration paid to Somerset’s parent company in exchange for Somerset’s termination of the original lease and entering into the New Ground Lease is comprised of 20 million shares of TeraWulf’s common stock and $12 million in cash. Under the terms of the New Lease, Somerset’s parent company will be prohibited from selling 15 million shares for 18 months and the remaining 5 million shares for 12 months. The primarily equity-based structure of the consideration further aligns the interests of TeraWulf's Chief Executive Officer with the long-term financial and operational goals of the Company and its shareholders.

About TeraWulf

TeraWulf develops, owns, and operates environmentally sustainable, next-generation data center infrastructure in the United States, specifically designed for Bitcoin mining and high-performance computing. Led by a team of seasoned energy entrepreneurs, the Company owns and operates the Lake Mariner facility situated on the expansive site of a now retired coal plant in Western New York. Currently, TeraWulf generates revenue primarily through Bitcoin mining, leveraging predominantly zero-carbon energy sources, including nuclear and hydroelectric power. Committed to environmental, social, and governance (ESG) principles that align with its business objectives, TeraWulf aims to deliver industry-leading economics in mining and data center operations at an industrial scale.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements include statements concerning anticipated future events and expectations that are not historical facts. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements. In addition, forward-looking statements are typically identified by words such as “plan,” “believe,” “goal,” “target,” “aim,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “should,” “would” and other similar words and expressions, although the absence of these words or expressions does not mean that a statement is not forward-looking. Forward-looking statements are based on the current expectations and beliefs of TeraWulf’s management and are inherently subject to a number of factors, risks, uncertainties and assumptions and their potential effects. There can be no assurance that future developments will be those that have been anticipated. Actual results may vary materially from those expressed or implied by forward-looking statements based on a number of factors, risks, uncertainties and assumptions, including, among others: (1) conditions in the cryptocurrency mining industry, including fluctuation in the market pricing of bitcoin and other cryptocurrencies, and the economics of cryptocurrency mining, including as to variables or factors affecting the cost, efficiency and profitability of cryptocurrency mining; (2) competition among the various providers of cryptocurrency mining services; (3) changes in applicable laws, regulations and/or permits affecting TeraWulf’s operations or the industries in which it operates, including regulation regarding power generation, cryptocurrency usage and/or cryptocurrency mining, and/or regulation regarding safety, health, environmental and other matters, which could require significant expenditures; (4) the ability to implement certain business objectives and to timely and cost-effectively execute integrated projects; (5) failure to obtain adequate financing on a timely basis and/or on acceptable terms with regard to growth strategies or operations; (6) loss of public confidence in bitcoin or other cryptocurrencies and the potential for cryptocurrency market manipulation; (7) adverse geopolitical or economic conditions, including a high inflationary environment; (8) the potential of cybercrime, money-laundering, malware infections and phishing and/or loss and interference as a result of equipment malfunction or break-down, physical disaster, data security breach, computer malfunction or sabotage (and the costs associated with any of the foregoing); (9) the availability, delivery schedule and cost of equipment necessary to maintain and grow the business and operations of TeraWulf, including mining equipment and infrastructure equipment meeting the technical or other specifications required to achieve its growth strategy; (10) employment workforce factors, including the loss of key employees; (11) litigation relating to TeraWulf and/or its business; and (12) other risks and uncertainties detailed from time to time in the Company’s filings with the Securities and Exchange Commission (“SEC”). Potential investors, stockholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they were made. TeraWulf does not assume any obligation to publicly update any forward-looking statement after it was made, whether as a result of new information, future events or otherwise, except as required by law or regulation. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements and the discussion of risk factors contained in the Company’s filings with the SEC, which are available at www.sec.gov.

Company Contact:
Jason Assad
Director of Corporate Communications
assad@terawulf.com
(678) 570-6791

FAQ

What is the new lease term for TeraWulf's Lake Mariner facility?

The new lease term for TeraWulf's Lake Mariner facility is 35 years, with an option to extend for an additional 45 years, potentially totaling 80 years.

How much has TeraWulf (WULF) expanded its Lake Mariner facility land area?

TeraWulf has expanded its Lake Mariner facility land area by nearly 50%, increasing from 107 acres to 157 acres under the new ground lease agreement.

What is the new infrastructure capacity at TeraWulf's (WULF) Lake Mariner facility?

The new ground lease grants TeraWulf exclusive access to infrastructure capacity of up to 750 MW at its Lake Mariner facility.

What is the consideration paid by TeraWulf (WULF) for the new ground lease?

TeraWulf is paying 20 million shares of its common stock and $12 million in cash as consideration for the new ground lease at Lake Mariner.