Fermi Inc. ($FRMI)

Good afternoon. Thank you for standing by, and welcome to the Neugebauer Fermi Shareholder Update Call. [Operator Instructions] Legal disclaimers for this call are at the start of the presentation for you to review shortly. I'd now like to turn the call over to Toby Neugebauer, the Co-Founder and largest shareholder of Fermi America.

I intended to join this call, this webinar by video today, but I've had an allergic reaction and my face is swollen like Will Smith in the movie, Hitch. This side of my face may hurt the stock price as the rumor will be that the proxy fight has turned physical. But seriously, I wanted to have this webinar because I think communicating through press releases and reporters is not the best way for the shareholders and other stakeholders to make the best decisions for Fermi. There has been a lot written about me, my motivations and my state of mind. Well, I want to be able to tell you directly where I am, is in a state of deep pride of what Fermi accomplished in the last 15 months. It's just too hard to take the joy of the accomplishment away. Obviously, I am disappointed that I will not lead it. But again, I'm so proud of what we accomplished, and it is the driver of my thoughts on what should happen next. I want to take my grandkids in 2035 to Amarillo and show them America's largest energy campus, the largest platform for generating AI compute. So my view is the next steward of this amazing project brings together the 3 Cs. And what I mean by that is the natural owner of the asset will be someone with a low cost of capital. This will be one of the most capital-intensive projects in the world. The second, natural owner of the asset is someone with strong construction capability. We bring a really good power construction team, but I think we want -- the natural owner will be great at the constructing of data centers. The third one, it's either a customer or it's someone who has customers. I just do want to set the record straight. We were not looking for customers at our departure on April 17. We were working on delivering on expanded ask by customer routes. My sons hate it when I say this, the way I looked at it is, we set out to sell steak and the market loved our steak so much they wanted just to add lobster. And we were out looking for the lobster, and in the data center world, that was the cooling, the MEP we talked about at the earnings call. Well, when I originally put together this presentation, I was hoping you'd be able to hear a diversity of voices, but unfortunately, compliance requires that it just be me. What I want to do with the purpose of this presentation is to explain to you why we are calling a special shareholder meeting to elect a new Board majority. The thing that we believe is critical is that Fermi must explore every option and the shareholders must have a strong voice in that decision. As I've said over and over, we cannot be more proud of what we've built at Project Matador. It is a uniquely rare asset. But we are entering into a new set of risk as we transition from laying the initial ground infrastructure into the actual construction of both the power generation and the data centers themselves. As we see where the business lies today, I think we see 4 major risks that warrant an evaluation of all the options. Leasing price risk, I think this is one of the things that concerns our family the most. It's not just good enough to get a tenant. We need a tenant deal that sets a precedent for the terminal value of the campus for the next 11 years. And I know there's a general thought that, hey, you can get a better deal on the next deal. I don't know I believe that as much in my conversations, I'm picking a name, Microsoft doesn't want to subsidize Alpha. Meta doesn't want to subsidize Amazon. And the terms will be pretty transparent. The other issue is the financing risk. And whether we like it or not, it's changed our cost of capital. And it probably -- what got me to realize the asset needed a strategic review is I do believe our cost of capital and the intensity of the capital associated with potentially needing the money for the MEP has gone up at the same time, which gets us to dilution risk. And Fermi 2.0, really, to me, this is Fermi 3.0. We started Fermi 2.0 in December as we prepared for this next phase of execution. But the bottom line is the capital intensity, combined with our increased cost of capital, has made the risk for dilution to the existing shareholders very, very high. Counterparty risk amongst -- across our customers, our contractors and vendors. Our remedy is an independent dual-track process that evaluates every market outcome before irreversible value and market opportunity is lost. It involves an independent committee led by leading bankers. It is not taking away the company's desire to go look for and enter into contracts with tenants. And we just want an evidence-based decision. We want a Board that hasn't made a conceived determination on what the outcome to be. We want a Board that wants to evaluate all of the options so that we can maximize value. How did we get here? There are five reasons. Again, the Board refused to run a process and the shareholders, I think, deserve one. The second problem with our company, and you're going to see it in the chart later on, is the stock overhang caused by the Pencross showing their interest in October and November had led to a severe stock overhang issue so that even while we execute, we don't get the benefit of the execution as we're going to show you on the chart later on. And then when you add the drama associated with our family's position, you've just made an overhang issue even more dramatic. Time to power is an asset. Any delay that we get in this process. erodes the premium that the buyer will pay. The bottom line, to quote Goose from Top Gun, "I feel the need, the need for speed." The reason we feel all feel the need for speed is because it will determine the market premium that we get. The beautiful part of the dual-track process is it gets the people focused on just leasing it the pressure of knowing that they're competing against people who want to buy it. And the same thing happens is the people who want to buy it have to be competitive with the economics that we could get from a lease agreement. So the Neugebauer family has 240 million reasons to want to get the best terminal value for this thing, period. As I said, I'm not seeking the CEO role. I think it is not because of my view of the job that occurred. I think it is the cost of capital problem. This is not a one-outcome solution. When we sought new Board members, only thing we ask for them is just tell us what you think the best outcome is for this company. We understand our period of stewardship over this asset is over. But what now we want to do is in that stewardship by making sure every shareholder gets the maximum value and get. And it's not just the maximum value, the maximum risk-adjusted outcome. We do have an extraordinary thing that we've built. We've tied up the one of the most valuable pieces of real estate on the planet. We have 50 full-time employees with expertise in developing power assets, which I think is going to be a really competitive advantage. As you know, we've secured 2-plus gigawatts of generation capacity that is secure. We've got more coming on the way. We've got water. We've got the clean air permit. Obviously, we were highly successful in financing facilities. We installed the gas pipeline, the water pipeline in record time. And then our leadership on coal is pretty much what everyone in the world is adopting the Fermi nuclear strategy. So what makes this valuable is that our source is -- our platform is difficult to replicate at speed. So we have 5 connected assets, each valuable independency a world-class platform. And if you talk to anyone in this business right now, it's all about speed to token. And there's no other place on the planet, you can get to speed to token at scale over the next 5 years than Project Matador. As you can see what we did on the construction side, this isn't a PowerPoint. This is a reality. And again, I can't be more proud of the speed at which we were able to execute. So again, many of you all have been to the site. I don't know how many helicopter tours -- I think they said we did 150 helicopter tours. People just were blown away. You want to talk about the key to getting customers? It's not a charm, even though, Noah, my son, who was in charge of our interactions with our customers, is incredibly charming. It's about execution. These are huge projects. They have experienced delays in almost all of their other projects. And so when you want to get a customer, what they really want to know is, are you going to do what you said you're going to do when you're going to do it? And what they saw from Fermi is something they had not witnessed in any of their other projects in the world. Unfortunately, the execution, and I'm going to start with the execution, is as you look at the story of the stock, not reflective of what really has happened at the company in terms of execution. We'll talk about the tenant delay here in a minute. Absent the tenant delay, we did everything we said we were going to do essentially when we said we were going to do it on the road show. But what we were coming up against as you all remember, there was a -- the original IPO was 35 million shares through a series of unfortunate events. There was a shareholder, frankly, I thought who had nonvoting shares, so I wasn't worried about his lockup, who had 56 million shares of stock. He has partners, office partners with Griffin Perry, and they begin exploring liquidity when the stock was at the higher levels, both in Europe and in New York. Originally, we had hoped that, that would occur through a strategic sale to someone accretive, but they began showing the block into the open market, and I was forced to [ led ] his shares on October 30, 31. At that time, the stock was at right under $30 a share and even with the good news with the KAYAK and all of the positive things, I have 3, the water being approved, the KAYAK with tenant #1 being approved, the stock declined by 46% before the announcement of postpone. And again, that first announcement was a postponement of the negotiations with tenant #1. Those continued on into February. But you can see we had already lost 46% of the value. And so you've got a block being shopped that's huge. And then you have the bad news around the KAYAK being terminated, and it just put us in a tough position with the stock. Then we go into January and February, we had an awesome February where we got the Siemens units delivered, we got the MFUG bank facility done, we've got the $100 million Keystone equipment loan, we got the Clean Air Permit approved. And every one of those days, we would get like 5% to 6% but then we just get crushed with people -- it was kind of like whack-a-mole, we would get success and get a pop, then whack-a-mole down. So that is where we saw a Pencross doing another sale. And again, I view these events in the 6, 7 to 8, 9, when Pencross is out there in that market. It's just really hard for us to get momentum on the stock. Then what we then had coming into the earnings lockup was things were going really good. The week I was terminated, the stock was up 38%. And I think we would have had even more than that. We were coming up with the -- when you think about that was -- Griffin said he was selling and then we had the lockup expiration for all of the pre-IPO investors. So we're really feeling the momentum go our way. And then obviously, when they terminated me, we had a pretty bad day. You take out the drama outside of the execution. So let's definitely -- we'll own the KAYAK termination. But you take out the drama, you have a 46% drop from the Pencross block sale. You have another 6% drop from the Pencross drop sales. That gets us to 52%. Then you have another 13% with Griffin's sale and then you take another 22% from the termination of me, you can see this isn't an execution story. This is an external story. And the point is kind of what I said before, there's no need to cry over the spilled milk. I think this has impaired the stocks, cost of capital moving forward. So that's just what we want to do is going about making sure we make the best decisions just in light of the fact that now there's another 240 million share overhang on the stock, and let's just figure it all out together. Our thesis for our go-to-market transaction, we have been working, looking at strategic options for our block, obviously. And so we have had engagement with investment bankers and have really good feel for 1 independent process. The new independent Board would evaluate credible structures within both paths of the same framework, a change of control transaction, credible structures. Was it cash, stock, mix, controlling stake, full acquisitions? We're indifferent. The new slate of directors, I told them I bring no preconceived notion on what it looks like. So in order -- again, in order to deal with our increased cost of capital that's just embedded into our shares today, what we're proposing is a dual track process, the new Board pursues the M&A transaction and the management team continues its tenant strategy. I can tell you on the new board, our view is we are open to anything. I'm like I really don't care and bring no preconceived notion to the table. I want the best risk-adjusted outcome for the shareholders. Obviously, we are the largest. And as it relates to the management team, to continue its tenant strategy, go get them. No one's rooting you on more than us. But what we are is we're very cautious about it's not just the price, the headline price, that matters but it's also the terms and specifically around the performance penalties and all of those things. These are big contracts, they're complicated contracts and we just want to make sure that all of those risks are embedded into our decision-making. So when we think about the buyers, okay, is 2 kinds. You've got that what I call the bottleneck strategics. These are people that must have power. So that includes your chip makers, that's your hyperscalers, that's your developers. If you were around me on a daily basis, you'd be, what's he talking about. I'm saying the word 3 Cs nonstop all the time and it's really how I think about who's the natural steward for this asset. And first of all, it's cost of capital. This will be, I believe, one of the most capital-intensive projects in the world. And we're showing $70 billion for Phase 1 through 4, that depends on if we're providing the lobster, i.e., the MEP. These numbers could get even higher. So one of the big things I've learned being in the energy business for a long time is cost of capital matters because it's your most expensive cost. The second is a customer. I think of it, this asset belongs to someone who has customers or is a customer. And so -- and then finally, construction. As we have great continency at Fermi around the energy construction component, being able to take it from the energy construction component to AI compute ready, we're going to -- the group that's naturally going to navigate or go towards this asset is going to have a great path towards construction. So when I look at that, I got to 6 categories of buyers. The hyperscalers are rapidly becoming leaders in the construction of their own projects. The oil and gas majors, I think, longer term, it may be too soon today for them, but they have the cost of capital and they had the construction credibility. The data center developers understand that the grid power game is over. And so they know they're going to need to get into the business of developing the power. What Fermi offers them as a plug-and-play team ready to get that started today. Obviously, we're getting interest from the infrastructures and the PE sovereign wealth funds, especially your infrastructure funds. They're used to large-scale energy projects so it's something they can -- a lot of these were big energy people that then gravitated into the data center development based on their being able to manage and finance large-scale projects. Some of these neo clouds, the word neo doesn't even feel appropriate for a $1 trillion new company. These people are trying to lock up their path to growth. Their companies are being valued on very high growth rates. So they are a natural. Some of these would be companies I would really like to have shares in. So when I look through this list, which one a cash from and which one I want stock. I probably could spend the rest of the afternoon philosophizing with you all on that. And then I think the natural people that need to buy this are the chip companies. I think they're quickly realizing they can't sell more chips than there is power to provide those. And there is no place that they can bring their customers to Project Matador and show them a clear path to significant amount of AI token production. What we've been looking at is we're numbers people at our shop and is, what does the value of 1 gigawatt get to each buyer type. So a data center developer, we would expect them to make about $990 million off of the 1 gigawatt of power at our site. And then you start looking at the hyperscaler because they're closer to that token compute, they can make a $5.6 billion per gigawatt annual EBITDA. But then I get to the chip companies, and I know one right now is just hot to trot for it that is more than capable of buying it. And the reason they're hot to trot is we estimate with our bankers that they could make a $10.5 billion annual EBITDA of providing the chips to that business. So you can see that we have an asset that really can move the needle for these companies. So when you look at the multiples, and you all on this call know these multiples better than I do. But if you look at the data center developers, they're trading at about 20 times. The hyperscalers are trading at 15, but really, their growth businesses are really trading higher and their more legacy businesses are trading lower. So I argue that the forward multiple for the hyperscalers for the AI compute business is actually higher and that the more mature businesses is lower. And then the chip and semiconductor businesses are 22. So you take those numbers of estimated EBITDA and then you look at the forward multiples and you can see why we're believing that this Board must take a hard look at a strategic transaction. Now I think one of my favorite ideas and almost didn't -- I almost did the nuclear separate to begin with. And I believe our nuclear business is way more diverse than just the AP1000s. Having said that, I believe the AP1000s are going to get built. I think the smart heads are going to prevail in Washington. I think the Koreans remain committed to it. But we also have other types. We have other SMR companies that are interested in at this site. And we have some of the derivative companies that are going to provide services in and around the nuclear industry that are very interested in the site. And what's great about our nuclear business as we have 2 of the top executives in the world when you've got in Mesut, who's our domestic partner leader. And then you have Dr. Choi in Korea, whose really expertise in this is unmatched. So I have absolutely advocated and almost to this day regret not bringing the nuclear business out. So we're thinking of everything. I think we've had a lot of drama in the press. And right out of the gate, I wrote a very positive press release. As I said already in this call, I believe Fermi's days are brighter ahead. And I did call for a review of all the possible transactions to maximize value for all shareholders. The company within 24 hours, said that it was not interested, the word on the street is that a couple of bankers have reached out to them, gave them very specific wonderful names that were interested in a strategic transaction and the Board made it clear it was not interested and engaging. If I'm going to not make it a personal thing about them and do the right thing for the company, I would just ask them to consider us doing the right thing and evaluating all of our options. Kind of in the 27 days, the Board has been incredibly aggressive. I think everybody has read the release. Bottom line is I have never received a negative view, a letter of how we're running the business wrong ever. I have sent multiple letters to this Board starting in January, outlining concerns I've had with the governance and things happening at the Board level, and not here to defend it. Bottom line, all we're asking for is a vote. The latest stat is just devastating. This new Texas equity capital markets we're trying to create here, when you basically raised the threshold for decisions in the middle of a dispute. So I said they wanted to do that in January or at the beginning. But changing the rules in the middle of the game, analogy we use for it as we're playing basketball and they took away the rim on our side because they were afraid we were going to hit the goal. And that's not a way to treat people. It's not the way to treat shareholders. Bottom line, they came up with their number based on what they thought the insiders have about 22.5% of the shares. So what we want to do is my -- I know you're tired of the movie analogies, but we had the horse racing season and my favorite one is Seabiscuit, where we won a match race. We just want to vote, and we want -- and it's not a predetermined vote on whether it's a strategic sale. It's not a predetermined vote whether it's a tenant deal. It's a post new Board vote on what's in the best interest of our company, and that's all we're out to do. Now I want to talk about the people that I brought in for our Board slate. I have no prior relationship with anybody here except Toby Neugebauer. I take that back. I've known 1 peripherally for a while. But David Daglio is the former CIO of Mellon Investments, a very qualified person. Charles Elson is one of the top corporate governance advisers in the country. John, I loved because he's been doing big projects for BP around the world. So he can help us evaluate our construction risk relative to an outright sale. Janet is a dynamo, and I hope to be involved with her longer term. She's a significant energy background, and I think you all will be more than impressed as you get to know her. Juan is the former Vice Chairman, PwC Global Advisory, you've led it, and then he's been one of the key directors at Wells Fargo. So in terms of how to run the radio to use a Texas phrase, one background is second one. Sheila is the same way. She's been doing this at the highest levels for a long time. So again, but what I really went out to do was to just go find the best people that I thought would give an honest assessment and add to the governance of the company. Right now, the company has essentially been hijacked into a kind of a 3-person committee and we've had governance issues going on for a while. And we need to get back to traditional, what I call, Texas-style which is the golden rule governance with this company. The engagement is already underway. Everyone already knows about Fermi, right? There's been 4 rounds of institutional investors. The hyperscalers have been engaged. Obviously, the hyperscalers, almost all have been there, most of them have been there multiple times. They've all been in the data rooms. So what's great about it is we're not introducing a new concept. And I think we can have a -- by June 30, we will know exactly across those 6 buyer categories, there's about 30 really legitimate buyers, and that's what's great about it. This isn't like we got to get 3 buyers. I mean, we have 30 legitimate across 6 buyer categories, and our banker shortlist is complete. I think we can have the process almost I think if we -- to get the meeting done by June 30, I don't see any reason that we don't know who the -- I mean who the owner is by August 1. Again, I don't think this is going to take a long period of time. So we think start to finish from today, it's a kind of a 75-day process. I hate to be this part of company's claim versus facts. It feels a little defensive. I was hoping somebody else would be able to do this. But I've talked about the stock decline. We had a 35 million share IPO. Mr. Perry and Mr. Mizell office together and have been communicating their intent and to provide -- to dispose of those shares in the market since October and it's just been incredibly hard for me to -- it's like every time we get some momentum, we get -- basically, what was going in at the company is the management team was feeling like they were only working for Steven Mizell. So that every time they created a success that it was being absorbed in the stock through the stock overhang. It has been my #1 issue at the company and the letter I wrote to the Board. This overhang issue was critical. Intent, it is not an ill-advised attempt for immediate sale. My heart is completely in the right place. As I said, I intend to be out grandkids on that site in 2035, and I would do nothing to jeopardize not seeing that happen. I am unaware of the cause after a careful comprehensive process. We'll be pushing back pretty hard on that. I think the market has -- the article in the Wall Street Journal, there has been significant differences between Governor Perry and myself. That is an accurate report. But there's not a text or an e-mail saying, I think you should do this better or that better. I was caught off guard on that one. Execution is, I don't even -- I'm not even -- the proof is out there. The execution, I will put what this team accomplished in the last 15 months of any startup and that we can't transact. I mean you go look at the volume of transaction from the I mean just the sheer number of deals we had to make to get this company in this place. And on the execution side, I was in the process, the real Fermi 2.0, you can ask any member of the management team started in December as I prepared this company to have better contracting, better accountability on the cost at the site in preparation for deploying billions of dollars. And on the -- we lost 7 really great people as a result of this event. And frankly, I think they would have lost more if it hasn't been my encouragement, encouraging people that the days ahead are great for Fermi, and they are going to get to build the world's largest energy complex and just hold on. I hear the public valuation. I think we talked about the overhang problem, the near term liquidity. What we did every day is from 3 to 4. And we did liquidity as the senior leadership team, and I'm talking about 20 people, we would do liquidity management. In terms of I had gotten some very favorable refunds coming. I'm afraid those are the people who complain to the Board about me the most were the people I was demanding some refunds from overbilling. Tenant negotiations, I said it in our May 30 earnings call that the tenants had bought the steak, they wanted lobster, and we were going out to procure the lobster and to be able to finance it, i.e., the cooling. So bottom line, this is about shareholders should decide the future of Fermi. This is about achieving maximum value for everybody. As I said, this is a shareholder democracy issue for me and this shouldn't even be this hard. This should be -- we shouldn't be spending any money in legal, which we're spending way too much on, to do what's the right thing for everybody, and that's to let the shareholders decide. Another thing I would point out as we close out here is in my conversations with the people the most knowledgeable, stakeholders in the business, they are all for a dual-track process. And again, these are people from key vendors and suppliers to large shareholders and echoing our point of view. And finally, as we close this call out, I want to say to my former colleagues. I want to say to the City of Amarillo and all the Fermi stakeholders, I am certain that Project Matador's best days are ahead of it. And as I started the call with, I cannot wait to take Melissa and my grandkids to Amarillo in 2035 to show them what our family had the privilege to conceive and launch.

Thank you. Everyone, this concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.