MARA Holdings, Inc. (MARA) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, welcome to the Marathon Digital Holdings Second Quarter 2022 Earnings Webcast and Conference Call. [Operator Instructions] I would now like to turn the conference over to your host, Charlie Schumacher, Vice President of Corporate Communications. Sir, please go ahead.

Thank you, Vikram. Hello, everyone and welcome to Marathon Digital Holdings Second Quarter 2022 Earnings Call. Joining me on today's call are our Chairman and CEO, Fred Thiel; and our CFO, Hugh Gallagher. Before we get started, I'd like to remind everyone that our prepared remarks may contain forward-looking statements, which are subject to risks and uncertainties and that we may make additional forward-looking statements during the question-and-answer session. These forward-looking statements are subject to risks and uncertainties and actual results may differ materially. When used in this call, the words anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project and similar expressions as they relate to Marathon Digital Holdings, Inc. are as such a forward-looking statement. Please refer to our earnings release for a full recitation of our forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainties, which may cause actual results to differ from those anticipated by Marathon at this time. In addition, other risks are more fully described in Marathon's public filings with the U.S. Securities and Exchange Commission, which can be reviewed at www.sec.gov. Finally, please note that on today's call, we will refer to certain non-GAAP financial measures in which Marathon excludes certain expenses from its GAAP financial results. Please refer to our company's periodic reports on Form 10-K and 10-Q for a full reconciliation of its non-GAAP performance measures to the most comparable GAAP financial measures. We'll begin today's call with prepared remarks from Fred and Hugh. After their comments, we will be going through some of our more popular questions from our investors before transferring to a live Q&A with our covering analysts. And with that covered, I'm going to turn it over to Fred to kick things off. Fred?

Thank you, Charlie and thank you all for joining us today for our earnings call. The second quarter of 2022 proved to be a challenging time for our industry, the broader market and for Marathon, but as we'll discuss today, we believe our recent progress proves that Marathon is well positioned relative to its peers to grow as a leader in securing and supporting the Bitcoin ecosystem. During the quarter, Bitcoin's price declined approximately 56%, at the same time, energy prices increased in part due to Russia's invasion of Ukraine. The combination of both factors has compressed margins and reduced profits for many in our industry. Miners who are running old equipment are overpaying for electricity have been forced to stop mining. As a result, the global hash rate has grown far slower than many analysts were projecting at the start of this year and we have even seen the difficulty rate adjust downwards multiple times since the end of May. At Marathon, we tend to be fairly well insulated from the macro environment relative to our peers since we run a lean operation, we are asset-light and we do not have large capital expenditures for data centers or power assets. However, as our financial results demonstrate, we are far from immune to the impact, as we are directly tied to a new but maturing asset. In the second quarter, in addition to the challenging macro environment, we also had to work through several obstacles unique to Marathon that depressed production and negatively impacted our results this past quarter. As we've discussed in our monthly production reports, our bitcoin production was substantially reduced during the second quarter due to downtime and maintenance issues at the Power Generating Station in Hardin, Montana, coupled with an elongated regulatory process that delayed the energization of our installed liners in Texas. For most of the quarter, the power generating facility in Montana struggled to produce an adequate amount of electricity to supply our miners the power. And in June, it seemed that Murphy's law came into effect when a severe storm passed through the region, damaging the power plant and taking offline all 30,000 of our miners in the area, which represented approximately 75% of our active fleet at the time. The downtime from an inconsistent supply of electricity and the storm caused our miners to produce approximately 45% lift bitcoin during the quarter than they theoretically could have if they've been running at 90% up time, which is more in line with our long-term target. Outside of Montana, the energization of our miners in Texas was repeatedly and frustratingly postponed by the power provider until the tactic dense status of the wind farm, where 68,000 of our miners are being installed to be confirmed. While confirmation was pending, we applied pressure where we could to expedite the process and we continue to have miners installed in preparation of receiving the green light to energize. By the end of Q2, we had approximately 30,000 miners or 3.9 exahashes installed across these new facilities. And as of August 1, that number increased to approximately 49,000 miners of 4.7 exahashes. Fortunately, these delays are finally behind us. Just last week, miners of the wind farm in West Texas started to be energized. However, before discussing the immense progress we've made subsequent to the quarter's end to energize our installed miners procure hosting for the remainder of our fleet and bolster our financial position, I'm going to turn the call over to Hugh to discuss our second quarter financial results in detail. Hugh?

Thanks, Fred. My focus today will be to comment on our operating results for the second quarter and to provide some color on more significant recent financing activities, including our withdrawal from the investment fund in June and the new credit facilities we put in place at the end of July. First, operating results. We recorded a net loss of $191.6 million during the quarter compared with a net loss of $108.9 million in the prior year period. This is an $82.7 million increase in loss and I'm going to walk through the components of this increase in our loss starting with revenues and margin. As mentioned -- as Fred mentioned and as we mentioned in our release, we faced some real operational challenges this quarter and we generated revenues of $24.9 million for the 3 months ended June 30, 2022, compared with $29.3 million during the 3 months ended June 30, 2021. This $4.4 million decrease in revenue was driven by lower revenue per bitcoin mined of $6.8 million and this resulted from the lower market prices for Bitcoin in the current year period when compared to the prior year period, partially offset by an 8% increase in Bitcoin production activity during the quarter, which had the effect of increasing revenues by about $2.4 million. Cost of revenues, energy, hosting and other during the 3 months ended June 30, 2022 amounted to $16.7 million compared with $4.1 million in the prior year period. This $12.6 million increase was driven by accelerated cost recognition associated with our early exit from Hardin of about $10.3 million and to a lesser extent, higher cost per bitcoin mined. Total margin, which we define as revenues less cost of revenue for energy, hosting and other totaled $8.2 million compared to $25.2 million in the prior year period. This is a $17 million decrease, driven primarily by the accelerated cost at Hardin that I mentioned earlier and the lower revenue per bitcoin mined. We also recorded a $21.8 million increase in depreciation expense during the current quarter. This included in the caption called cost of revenues, depreciation and amortization, about $18 million of this $21.8 million was related to the acceleration of depreciation into the second quarter as a result of our decision to exit Hardin. The remaining increase in G&A was just the impact of having a larger fleet year-over-year. So that sort of covers depreciation and our margin, but the largest single driver of the steeper loss in the quarter was the significant decline in the carrying value of our digital currencies, driven by the lower bitcoin prices during the quarter. We recorded a combined impairment expense/fair value decline of $207.3 million during the current period quarter, compared with $125.8 million in the prior year period to that $81.5 million of an unfavorable earnings variance quarter-over-quarter. We also saw increased costs related to income tax expense of about $10 million, operating expenses of around $6 million and interest expense associated with our convertible notes of about $3.7 million. Partially offsetting these unfavorable variances was a gain on the sale of equipment of $58.2 million. In December of 2021, we entered into a contract in which we agreed to sell certain equipment in conjunction with development of commercial activities at the [ King Mountain ] facility. During the 3 months ended June, we sold -- we sent 2 shipments of equipment for cash proceeds of approximately $87 million and realized a gain -- a total gain of $58 million. And finally, adjusted EBITDA, as we define it, was a loss of $147.2 million compared with a loss of $105.2 million in last year's quarter. This $42.1 million decline in adjusted EBITDA primarily resulted from the decline in carrying value of our digital assets, which I spoke about earlier both impairments and changes in fair market value and lower total margin, partially offset by the gain on the sale of equipment. Now I'll turn briefly to a few of the more recent updates on the third quarter. These are things that are -- that we see coming up in the next quarter. In July, we sold the final shipment of equipment related to King Mountain. We received proceeds of $44 million and expect to record another gain of $29 million on the sale. We can also now say that we finished the accelerated cost recognition associated with the Hardin exit. During the month of July, we recorded $7 million of accelerated costs in cost of revenues, energy hosting and other and an additional $13 million in depreciation costs. We are now in the process of moving and/or selling the Hardin miners and we'll report on the outcome of these efforts in our monthly production report as appropriate once we have more definitive plans for these assets. Turning briefly to our bitcoin holdings. At June 30, we held around 10,055 bitcoins, of which 2,820 were being utilized as collateral. The fair market value of the remaining 7,235 unrestricted bitcoin was approximately $143.1 million. We also had unrestricted cash on hand of about $86.5 million. As to our bitcoin holdings, we expect to continue to add to our holdings over time through mining activities. And as our mining activities increase, we may sell a portion of the bitcoin produced in future period to fund monthly operations for treasury management purposes or for general corporate purposes. As previously reported, on June 13, we withdrew 4,769 bitcoin from our investment fund and transferred into direct company ownership. As a result, we no longer will receive mark-to-market accounting for the bitcoin formerly held in the investment fund and the 4,769 bitcoin are now classified on our balance sheet as digital currencies. Also during the quarter, we terminated the loan of bitcoin of around 600 bitcoins. These were treasury management actions that we wanted to consolidate our bitcoin holdings in support of the anticipated Silvergate financing, which we placed on July 28. Speaking of that financing, we entered into an additional $100 million term loan and we refinanced our $100 million revolving credit facility. The term loan includes the $50 million draw out closing which we've executed has carried an interest rate of 7.25%. And there's a $50 million delayed draw that we have up to 270 days to choose to draw that facility. Both the term loan and the revolving credit facility are secured by Bitcoin and both mature in August of 2024. Turning to the cash flow statements. Our total cash position including cash, cash equivalents and restricted cash was right around $90 million, a year-to-date decrease of about $179 million. The primary drivers of this were expenditures of $394 million in advances to vendors related to Bitcoin server orders and to a lesser extent, $14 million related to capital expenditures and $14 million related to equity investment. These uses of cash were partially offset by proceeds from asset sales of $79 million, proceeds from the issuance of common stock of $161 million and proceeds from borrowings under our revolver credit facility of $35 million and that $35 million that was outstanding at the end of June has since been repaid. Looking forward for the remainder of the fiscal year, we see cash needs for investment, including shipping costs related to previously ordered miners that will be shipped to be substantially lower than what we've incurred to date. We are estimating this to be in the range of $150 million to $175 million and that completes my comments. I'll now turn it back to Fred.

Thanks, Hugh. The second quarter tested our resilience and our resourcefulness. As a result, as recent events have demonstrated, we not only weathered the difficult times, but we capitalized on opportunities to improve our operational and financial position subsequent to the quarter's end. At the end of July, we received the much anticipated news that the exemption the power company have been waiting on have been confirmed and that miners could start to be energized at the wind farm in Texas. Just last week, the energy provider started feeding power to the data center and energizing our miners. Of the 68,000 miners that will eventually come online at this facility, approximately 40,000 are already installed and are now being energized. As of this morning, we had brought approximately 9,700 miners online, which added 0.9 exahashes to our hash rate, energizing this much capacity is a complex process that will occur in stages. According to the latest schedules, the facility should be constructed and energized by the end of the third quarter of this year. At that time, we should have approximately 68,000 miners online at this facility, working to secure Bitcoin's ledger, process transaction and produce new bitcoin for Marathon and our investors. In addition to energizing miners in Texas, we also recently eliminated the uncertainty surrounding our future hosting capacity by securing new hosting arrangements to achieve our prior hash rate target. When vetting potential new hosting arrangements, in addition to the quality of the operator, we prioritized speed of deployment, cost of electricity and hosting, geographic diversity and the source of power. With this in mind, we signed a major new agreement with Applied Blockchain, securing approximately 200 megawatts worth of hosting capacity, 90 megawatts of which is in Texas, while the other 100 megawatts are at a wind farm in North Dakota. As a part of this arrangement, we have the ability to add an additional 70 megawatts of capacity, bringing the total amount of hosting across all of the 5 blockchain facilities to 270 megawatts, if we choose to exercise the option. Additionally, we opted to expand our agreement with Compute North to include an additional 42 megawatts of hosting capacity at the facility in Granbury, Texas and we're also expanding with several smaller providers in the U.S. In total, we secured enough hosting capacity to support our prior target of 23.3 exahash, based on construction schedules that's our understanding from speaking with our hosting providers that we will have enough miners installed to reach that target by the middle of 2023. In addition to substantial operating progress we made to energize previously installed miners and procure hosting arrangements for others, we have taken measures to enhance Marathon's financial position going into the second half of 2022. As listed in our contract, which were published in December of last year, the S19 XPs we purchased in BITMAIN benefit from price protection. For the July and August shipments, we received a price adjustment on our first shipments of S19 XPs that were relatively in line with current market conditions. It is our current belief that we will receive similar adjustment if market conditions persist through the end of the year. These price adjustments materially reduced our potential capital expenditures for 2022. As Hugh mentioned, rather than relocate all the miners that we installed in Hardin, Montana, we have opted to sell a portion of them. This decision begs the question, how are we still on track to achieve our target of 23.3 exahash? At Marathon, we're always looking to reduce our costs and boost performance, especially in current market conditions when Bitcoin's prices declined and energy rates have increased, compressing margins for Bitcoin miners. As part of this strategy, and in anticipation of the potentially industry-wide margin compression, we opted to purchase an additional 30,000 S19 XPs from BITMAIN in April of this year. We're currently in the process of using these new miners to upgrade our fleet by replacing some of our [ F19 Js ] and S19 PROs with XPs. We are still on target to achieve our prior goal of 23.3 exahashes, but with the upgrades approximately 66% of the 23.3 exahashes will be coming from XPs. The S19 XP is 30% more energy efficient than the prior generation and by converting to these machines, we are decreasing our electricity cost on a per terahash basis. As a result, once fully installed, we believe Marathon's fleet will not only be one of the largest, but among the most energy-efficient mining fleet on a per terahash basis. One other update worth mentioning relates to our hosting arrangement with Compute North. Our original agreements with them included the fixed price for energy and hosting as well as a small profit share on a portion of our overall fleet. Given the current market dynamics, we opted to renegotiate these contracts to maximize the potential profitability. We have eliminated the joint venture and profit share. Under our new agreement, we will continue to pay a fixed rate for hosting and we will have an extremely attractive fixed price on the wind energy at the facility in West Texas. The remaining grid energy we use has passed through pricing, which gives us the opportunity to benefit from hedging and participating in curtailment programs because we now have the benefit of being able to control when our miners will be curtailed, we can now benefit from selling energy back to the grid when it makes economic sense to do so as some of our peers in the industry have recently demonstrated, there are times when it can be more profitable to sell electricity back to the grid than it is to mine Bitcoin. Under our new arrangements, we now have the ability to participate in this potential upside. In summary, the second quarter was challenging for the industry and for Marathon in particular. Bitcoin mining is a nascent industry and as I mentioned in our last call, there is no playbook. However, given our progress, we're confident that we remain on track to grow our position as a leader in this space. Miners are coming online in Texas. We have hosting arrangements secured to achieve our target of 23.3 exahashes by mid-next year. Our mining fleet is state-of-the-art, consisting predominantly the most efficient Bitcoin miners available in the market. We have a warchest in Bitcoin in our liquidity position, balance sheet continue to improve. Overall, we have entered the second half of the year with added confidence that we remain on track to grow our position as a leader in supporting and securing the Bitcoin ecosystem. With that, I'll turn it back to Charlie so we can begin taking questions. Charlie?

Thanks, Fred. At this time, we're going to commence the Q&A section of today's call. We'll start by answering some of the questions submitted by investors on our new Q&A platform. In total, we received about 100 questions, which was fantastic. We won't have time to tackle all of them today, but we do want to cover some of the most uploaded questions and also let you all know how much we appreciate the interest in Marathon and the opportunity to have more of a dialogue with our investor base. So to start, the first question comes from [ Bill Gee ], who asked, can you please give us an update on the rigs and when they will be plugged into full capacity? We got approval from FERC and they're curious about the energization time line. So I think we've actually covered this a little bit in the prepared remarks and in today's earnings release. But just curious, Fred, or if you -- any color that either of you want to provide on the process of receiving approval and starting to energize?

Once the FERC approval was received, the power provider could proceed with beginning to energize the site, which took certain number of days. They can't turn on 280 megawatts at one time, they turn it on in essentially kind of 20-megawatt chunks. And so while we have 49,000 miners installed at the site, those will be energized 20 megawatts at a time and we expect to be fully energized with the 68,000 liners installed on site by the end of September.

Excellent. Our next question comes from [ Tamir Gee ], who asks, what are Marathon's plans for any severe downturns that may occur within the crypto market in the coming years. So I guess, any comments around kind of resiliency of the model or how we're prepared to kind of survive crypto winter?

I can touch on part of this and maybe Hugh will have a comment on the other side of this. But essentially, because of the way we're structuring these power agreements, we do have the ability to curtail our mining operations as mining becomes unprofitable. This is different than other miners who may have PPAs where they're obliged to take the energy. And so we believe that we have strengthened this strategy and it will help us going forward. As it relates to the other side of this and how Bitcoin pricing may affect us, Hugh, I'll let you comment on that.

Again, I think, Fred, the whole point with this is optionality, right? So you want to build flexibility and optionality into your processings. As we said, the financing we completed goes a long way in helping us achieve that goal. And the other thing I think we need to look at is, as we mentioned, as we produce more Bitcoin using -- considering using a portion of that production every month to cover your costs, where regardless of where Bitcoin is going up or down, you're matching the cost of Bitcoin with your cost of production within the same month, that's something we're certainly looking at. But I would say there, in addition to what you mentioned, which is probably the first order issue. The second one is building in financial flexibility, so you can continue to absorb fluctuations that will come in the market.

Thank you. This is probably a good segue to actually to our next question, which comes from Noah P, who asks, how does Marathon compare or stand out from other miners in the market? So any other additional comments besides what you 2 just touched on related to Marathon's differentiators or kind of what makes us unique?

I think as we've stated many times in our public disclosures, these earnings calls and in presentation, our strategy is different than many of our colleagues in the industry where we operate with an asset-light model, working with third parties to do hosting and provide energy for us as opposed to being vertically integrated. We think that has certainly given us a lot of flexibility, especially with the delays that we incurred in energizing miners had we been having to make huge CapEx expenditures and investments in infrastructure. I think it would have been a very different financial situation for the company, but our strategy provides us with great amount of flexibility. And I think as you can see, we've weathered the storm quite well.

The section is a little more esoteric, if you will, so Fred maybe I'll pass this over to you. [ Ivan Viu ] is wondering about the Ethereum's move to proof of stake, do you think there may be any sort of impact on Marathon or earnings as a result of that shift?

Yes, I'm not going to directly comment on whether it will impact our earnings? I think just generally in the marketplace, Ethereum and the ether platform is really a platform for developing this decentralized application and smart contracts where Bitcoin is really or all around Bitcoin as cryptocurrency and as a network that really is ideally designed for tracking ownership of assets. And I think the 2 of them will continue to operate very independently of each other. I think there's still going to be different versions of Ethereum, Ethereum CRM, you have the current version of Ethereum and there's people in the news commenting about doing yet another forth of Ethereum. I think bitcoin won't be really impacted by that much.

Thanks, Fred. Next question comes from [ Mark B ], who asked, is there a future potential of a dividend paid in Bitcoin?

This is something that I think as a management team, we've discussed it's not in the current plan, it may be an option in the future or not, we don't know, but I think time will tell.

Great, thanks. Next question, maybe, Hugh, this might be a good one for you. New DS, is Marathon considering adding additional shares, hence, potentially increasing dilution? So Hugh, maybe can you touch on sort of the capital allocation strategy a bit and some of the different levers that we have available?

Sure. So we have an ATM and at-the-market facility that's active that we're using. And I mentioned earlier, we -- that was a source of about $161 million in the first 6 months of this year. So we will continue -- that's an option that's available to us. And given the growth mode that we're in, that we will probably continue to lean on, although less needs coming up in the next 6 months than in the first 6 months. We also try to make sure that we always keep in mind that whatever we're doing in the short-term fits a long-term debt equity split, debt equity capital structure. And that's why we felt comfortable adding a little bit of debt capacity this quarter because of how much we've been able to raise on the equity side, you can lever that with a little bit of debt, don't want to go overboard in that and always finance keeping your long-term view of where the company needs to be and keeping optionality and flexibility available to yourself. The short answer to your question is yes, we will continue to tap the equity markets as needed for growth. I think the good message that we put out there is we clearly want to get to the point where we're not tapping the capital markets to pay for monthly operating expenses, which is where we've been to this point.

Great. Thank you. I think we'll do one more question before we kind of switch gears here a little bit. So last question, David Jay asks, is Marathon digital planning on branching out at any point and mining other cryptocurrencies besides Bitcoin? Fred, maybe you want to touch on that one a little?

At this point, Bitcoin is our primary focus and only focus. We may do experimentation just to learn and understand how some different cryptocurrencies operate, but Bitcoin is our focus.

Great. So in the interest of time, I think we'll wrap up the section of the Q&A. Again, we really appreciate the questions and the interest and I wish we had more time to answer all of them. But for now, I'm going to turn the call back over to our operator to open the line to questions from our covering analysts. So Vikram, the mic is yours.

[Operator Instructions] We have a first question from the line of Jon Petersen with Jefferies.

Congrats on all the progress over the last few weeks. Maybe my first question, I guess if we think about the second half deployments and some of the delays that you had in the first half of the year, I mean, I guess, talking to your confidence level that we're not going to run into energization delays or anything like that with the next level of deployment.

Sure. So the initial site we're deploying in the second half of the year with Applied Blockchain already has capacity running at it. So that site is the expansion that we're doing there is really more of a construction issue than anything else, so we don't foresee any energization issues there. The second site, based on their historical operating experience, we feel fairly confident that, that will happen on time. The good thing is, today, with the energization of King Mountain and these additional capacity that we've tied up with other hosting providers, all of the inventory of miners that we have will be fully absorbed here very shortly. And if you look at the second half of this year, it's predominantly the XPs that are yet to be delivered that will be deployed there. So if anything, we believe it's really more deliveries will be the gating item than construction or energization.

Okay. Got it. And then on the deliveries, you mentioned that the July and August delivery were discounted from the original purchase price, not sure if you can -- if you're able to quantify that for us? I think if I remember right, you guys paid $79 a terahash, I think the market rate I would imagine is less than -- down by more than a third from that and your final payment is a third. So I'm just curious if the market terahash rate is less than 33% lower than where you paid, are there ways to renegotiate that contract, maybe increase the amount of miners that you're buying? Or just how should we think about that?

Yes, I think you should think about it as we will be deploying 23.3 exahash and we're benefiting from essentially a decrease in the amount of CapEx we're going to have to pay to get those miners deployed. I think your estimates on kind of market pricing or most probably definitely in the ballpark, you can obviously see those numbers in the secondary market starting to see the XP prices come down in the secondary market already pretty aggressively. So I think all we're going to comment on that for obvious reasons.

We have next question from the line of Chris Brendler with DA Davidson.

Congratulations on the progress. I'm not sure this is for Fred or for Hugh, but I'd love to hear on the, really impressive that you were able to go through this quarter without selling material now to Bitcoin like a lot of your peers did. Can you just maybe give a little more detail on the sources of cash in the quarter, looking specifically at the Compute North loan? And how much of that has been repaid back as well as any -- something like you have less payments on some of these orders than you expected, can you quantify that at all?

Hugh?

Sure. So Chris, there's been no activity on the Compute North loan, so that's still outstanding, so that was not a source. The 2 largest single sources of funds were the -- with the 87 -- well, the proceeds from the sale of the miners, that was $87 million. We pulled on the revolver and we also -- we -- despite the -- that it was not a tremendous quarter from a standpoint of stock price, we did keep tapping our ATM periodically during the period as well. So they were our 3 main sources of funds and of course, the biggest use of funds was clearly continued payments for miners. Important point is that a lot of the impact on minor pricing adjustment comes -- came in July at very end of June and in July. So that did not have a significant impact on the current quarter. It is more of an impact as you're looking forward for the remainder of the year. And as we said, if you just look at -- if you look at where we are, in the first 6 months, I think our number is around $390 million of advances for miners. And over the next 6 months, our forecast is around $150 million to $175 million.

Great. My follow-up question and I do have a lot more, but I'll get back in queue. The new facility, a new hosting arrangement with APLD and I think you've got another -- a couple of other hosting deals that you've signed to complete the 23.3. Can you talk a little about the pricing? I was always so impressed by the Compute North transaction back in December at $0.042 per kilowatt hour, was really attractive pricing that's pushing in today's environment. Can you give us any indication on how much higher just given with half energy prices, your new contracts are?

Yes, while we haven't sort of announced the exact price, it is a fixed price contract. And I think if you look at the fact that we'll be deploying XPs there and with that energy efficiency, we'll still be relatively in the same ballpark as prior fixed price agreements that we have with Compute North.

So the XP efficiency offsets the increase in power to your cost per Bitcoin is relatively stable?

Yes, that's a great way to look at it.

We have next question from the line of Chase White with Compass Point.

So just curious, what portion of the power purchase agreements have the ability at this point to participate in curtailment programs? I mean you mentioned that a certain portion you're able to actually do that and sell power back to the market. So I'm just curious what amount of power is kind of subject to that?

So in relation to the King Mountain site, which is a wind farm, the wind energy that we have has a fixed price, very attractive fixed price. And so for example, if you look at the forward market in ERCOT this week, it's [ sending ] $400 a megawatt or something like that, we are significantly below that. And so that gives us a very big opportunity to sell the wind energy back. The grid energy, we only take it when we need it and want to mine with it. So that's not energy that we sell back. But the wind energy, we have 100% benefit from if we sell it to the grid.