TeraWulf Inc. (WULF) Earnings Call Transcript & Summary

Greetings, and welcome to the TeraWulf Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note that this call is being recorded. I will now turn the call over to John Larkin, Senior Vice President and Director of Investor Relations with TeraWulf. Please go ahead.

Good morning, and welcome to TeraWulf's Second Quarter 2026 Earnings Call. Joining me today are Chairman and CEO, Paul Prager, our CTO, Nazar Khan; and our CFO, Patrick Fleury. Before we begin, please note that our remarks today may include forward-looking statements. These statements are subject to risks and uncertainties, and actual results may differ materially. Words such as anticipate, expect, believe, intend, estimate, project, could, should, will and similar expressions are intended to identify forward-looking statements. For a discussion of these risks, please refer to our filings with the SEC available at sec.gov and in the Investor Relations section of our website. We will also reference certain non-GAAP financial measures. Reconciliations to the most comparable GAAP measures are available in our earnings release and filings. With that, I will turn the call over to our Chairman and CEO, Paul Prager.

Thanks, John, and good morning, everyone. The second quarter was defined by execution and expansion. At Lake Mariner, we converted additional contracted capacity into operating infrastructure and recurring lease revenue. At the same time, we expanded the platform through the acquisition of [indiscernible]. Following quarter end, we executed a 401-megawatt lease with Anthropic at the justified data campus and entered into an agreement to monetize our interest in the Abrenathe joint venture. Taken together, these developments demonstrate the model we've been building, which is to secure power advantaged infrastructure, contract with high-quality customers, deliver capacity in phases and selectively recycle capital into the next generation of growth. Our #1 priority remains execution. You see that most clearly at Lake Mariner. CB-3 was fully delivered and generating lease revenue in early July, bringing total revenue generating critical IT capacity at the campus to 102 megawatts. That delivery also satisfied the applicable conditions for $600 million of Google's credit support for fluid stacks obligations to become effective. CB-3, therefore, represents more than just the construction milestones. It is another building delivered, another contracted revenue stream online and a significant portion of the credit support behind the project now effective. Following quarter end, we also amended certain fluid stack leases. Those amendments increased contracted capacity added rent associated with tenant requested scope changes and established updated delivery schedules on a data hall by data hall basis. Nazar will cover construction and commissioning in greater detail, but the key milestones are straightforward. At CB-4, we remain on track to begin energizing the first data hall in late September. At CB-5, we expect to begin energizing the First Data hole in very early January. The first data hall at CB-4 is already in commissioning, and we continue to work closely with Fluid Stack, Google and the broader project team to align infrastructure readiness with hardware deployment. The important point here is that CB-3 is online and generating revenue, CB-4 is in commissioning and CD-5 is advancing against the updated customer aligned schedule. That is execution. And it is increasingly visible in our financial profile with high-power compute leasing representing the majority of our revenue during the quarter. While Lake Mariner continues to deliver, the second major theme is expansion. Nowhere is this more evident than in Kentucky. Following quarter end, we executed a long-term lease within Anthropic for approximately 401 megawatts of critical IT capacity at our justified data campus in [indiscernible]. The agreement expands our relationship with Anthropic and represents approximately $19 billion of contracted revenue over the initial 20-year lease term. The economics are highly attractive for our shareholders and reflect the value of controlling large-scale power secured infrastructure in a market where capacity is increasingly scarce, but the significance of the agreement goes well beyond its size. Lake Mariner demonstrates that we can take a legacy industrial power site and convert it into a large-scale operating high-power compute campus. Justified demonstrates that we can repeat the model in the new region. We secured the site, control the power infrastructure and converted that position into long-duration contract with one of the leading companies in artificial intelligence. That is our model; control the infrastructure, contract capacity, finance it against long-duration revenue and deliberate in phases. We also expanded our Kentucky platform through the acquisition of the Muskie Data campus in Eastern Kentucky. Muskie is a gigawatt-scale development site and a prime example of the utility partnership path to Tower that we discussed on our last earnings call. The campus is located within an established industrial park and is being developed in partnership with investment-grade Kentucky Power, an AEP company. Our electric service arrangements were entered into under a data center tariff approved by the Kentucky Public Service Commission, which provides for 1 gigawatt of electric service. Kentucky Power is expected to construct a new 345-kilovolt substation connected to AEP's existing 765 KV transmission network with initial electric service expected in the fourth quarter of 2028. This is not simply land with a Q position, it is utility supported development pathway with contracted electric service, defined infrastructure obligations and a state-approved framework for large-scale data center development. The market too often treats a Q position or inclusion in a back study as equivalent to available power. It is not. The relevant and important questions are, when can the power be actually delivered, under what contract or commercial framework and with what degree of infrastructure certainty? Muskie provides considerably greater visibility for each of these points. Muskie also builds on the substantial momentum and relationships we've developed in Kentucky. The Commonwealth is increasingly attractive to prospective tenants because of its power infrastructure, business environment and the constructive engagement we have seen from state, utility and local stakeholders. Justified provides our near-term contracted delivery opportunity in Kentucky, Muskie provides the next gigawatt scale platform in our pipeline, and we are actively advancing commercialization discussions for the site. Given its near-term tower availability, we are increasingly optimistic about the potential to expand the Muskie campus to as much as 2 gigawatts and accelerate portions of the current development time line. In addition to Muskie, our pipeline includes additional expansion opportunities at Lake Mariner and Lake Hawkeye in New York, Chesapeake and Maryland and there are many other sites we are actively evaluating, each is at a different stage, but collectively, they provide multiple pads to power, customer contracting and phased delivery rather than dependence on a single market or an interconnection process. As we expand the platform, we are also being disciplined about where we spend our time and capital. That's what drove our decision on Abernathy. Following quarter end, we entered into an agreement to sell our entire interest in the Abernathy joint venture for approximately $530 million. Abernathy is a great project. But at this point, interest development is simply not the right project or the best project for us to continue to own. Our strategy is increasingly focused on large-scale opportunities where we control the site, control the power infrastructure, the development process and the customer relationship, all that drives long-term economics. The Abernathy transaction allows us to focus our management resources and capital on those opportunities. It also demonstrates our ability to create value through development and selectively recycle capital into larger scale projects that we directly control. The Anthropic lease demonstrates our ability to create long duration contracted value. The Abernathy transaction demonstrated our ability to realize value and redeploy that capital into the next generation of growth. We've also recently cleared an important milestone at Chesapeake. On July 29, the Federal Energy Regulatory Commission, FERC, authorized our proposed acquisition of the Morgantown site. That approval clears a significant regulatory condition towards closing. The site includes approximately 210 megawatts of existing grid-connected generation, substantial electrical infrastructure and meaningful long-term expansion potential in one of the most power constrained regions in the country. Subject to the remaining closing conditions required consents, Chesapeake offers the potential to develop an integrated generation, storage and data center campus capable of supporting up to 1 gigawatt of data center capacity while serving large-scale compute demand in the most competitive region while supporting regional grid reliability. We have developed our pipeline this way deliberately. Regional diversity gives us access to different power markets and utility partners, but it also provides greater operational and security resilience. We do not want the platform dependent on 1 grid, 1 regulatory regime or 1 source of generation. Our portfolio includes utility supported grid connected campuses, sites with existing generation infrastructure and locations capable of integrating generation and storage or supporting additional generation on the broader grid. We view behind-the-meter power primarily as a bridge to utility supported grid connected campus. Over time, we believe the most reliable, resilient and economically sustainable tower solutions will be those interconnected with a larger utility system. That concept is becoming increasingly important. The constraint on AI infrastructure is not demand, it is power, transmission, interconnection and the ability to bring new infrastructure online responsibly. We have consistently said that data center infrastructure should be an asset to the grid not a burden to it. And that is how we view Governor Hocol's recent executive auditor in New York. We do not believe the executive order will disrupt our development timing at either Lake Mariner or Lake Hawkeye. The Wulf compute build-out at Lake Marine is already permitted, and Lake Hawkeyes is in the early stage of development, and it has not been impacted. Importantly, the Governor has described the order as an effort to establish a framework not a permanent ban on future data center development. We welcome such a framework. Responsible development at this scale necessarily requires careful consideration of environmental impact, grid reliability, cost allocation and community priorities. We do not view those considerations as a binary choice between development and responsibility. Instead, we work constructively with regulators, utilities and local communities to address legitimate concerns to operate responsibly and be an active and valuable long-term member and neighbor within the communities in which we operate. A clear framework should establish the rules of the road around reliability, cost allocation, resource use, generation, storage and community impact so that credible projects can move forward responsibly. We believe increasingly formal requirements for large load development are inevitable across all major power markets, not only in New York. The better approach is to prepare for reasonable standards now rather than assume projects can avoid them indefinitely. That means developing sites that can demonstrate credible and redundant power delivery, assume appropriate cost responsibility and, where required, support additional nameplate generation capacity or otherwise help bring incremental generation and grid resources online. Many of the principles outlined by the governor are entirely consistent with how TeraWulf already approaches development. We understand power markets, generation, transmission and believe clear standards will ultimately favor experienced, well-capitalized developers with credible infrastructure solutions and the demonstrated ability to execute. Increasingly, data center demand is also serving as a catalyst to long overdue investment in the nation's transmission and generation infrastructure. That is where TeraWulf is positioned. So when you step back, the progress is clear. We've delivered CB-3 and brought another contracted revenue stream online. CB-4 and CB-5 are advancing against updated customer line schedules. We've expanded our Kentucky platform through the Anthropic lease Justified and the acquisition of Muskie, we've agreed to monetize Abernathy so we can focus our capital and management attention on larger scale opportunities that we directly control, and we've cleared an important regulatory milestone at Chesapeake. Together, these developments reinforce both the consistency and the depth of out strategy: build a regionally diversified pipeline with credible path to power, contract with high-quality customers, deliver capacity in phases and recycle capital where doing so creates long-term value for our shareholders. Based on the strength of the platform and the customer engagement we continue to see, we reaffirm our target of contracting an incremental 250 to 500 megawatts of critical IT capacity annually. We will pursue that growth with discipline and remain focused on power control, customer quality, execution certainty and shareholder returns. We have the sites, the capital, the people and the customer demand. Now it is about delivering. With that, I'll turn it over to Nazar to discuss construction, commissioning and the updated Lake Mariner delivery schedule.

Thank you, Paul. I'll focus my remarks on construction, commissioning and delivery at Lake Mariner. As Paul noted, CB-3 is fully online and generating lease revenue. With that building complete, our focus is now on executing against the updated delivery schedules for CB-4 and CB-5, which were developed in close coordination with our tenant. From an execution standpoint, the 2 most significant variables have been electrical labor availability and ongoing design optimization for our customer. Electrical labor remains highly constrained across the data center industry. As the design and electrical scopes became more fully defined, we added a second electrical contractor and scaled the workforce to support approximately 1,000 electricians at peak. That additional capacity is important to maintaining the targeted delivery schedule. At the same time, working closely with FluidStack, we continue to optimize the electrical, cooling and operational requirements while design, procurement and construction were already underway. Although this added complexity to execution, it enabled our customers to establish the deployment standard tailored to the latest generation hardware. With those resources and updated requirements now incorporated into the plan, we have greater visibility into the remaining work and remain confident in the revised delivery schedules. Let me now turn to commissioning and explain where CB-4 stands today. Commissioning generally progresses through 6 levels from Level 0 through Level 5. Level 0 covers design and planning, while Level 1 involves factory acceptance testing of major equipment before it's ship to the site. Our current focus is on levels 2 through 4. Level 2 or installation verification confirms the major electrical, mechanical and cooling equipment has been properly installed, connected and configured. This is also when the tenant begins installing and tuning its cooling distribution equipment. Level 3 or start-up and pre-functional testing is when individual systems are powered and tested under operating conditions. The customer also begins bringing server racks into the data hall and integrating them with the building's power, cooling and control systems. In practical terms, Level 3 marks the transition from construction into live systems commissioning. Level 4 or functional performance testing is the contractual delivery milestone. Once testing is complete, the data hall is turned over to operations and begins generating the revenue. The first data hall at CB-4 is currently in Level 2 commissioning. We expect to begin Level 3 in mid-August with the customer server rack scheduled to arrive shortly thereafter. We remain on track to reach level for and begin generating lease revenue from the first data hall in late September. CB-5 is also progressing against the revised schedule with the first data hall expected to begin energizing in very early January. Across the project, we continue to have a highly constructive working relationship with FluidStack, Google and the broader project team. The revised schedules were developed collaboratively to align infrastructure readiness with customer hardware deployment. That coordination is critical on a project of this scale where construction, commissioning, equipment delivery and systems integration must all progress together. In summary, CB-3 is operating and generating revenue. CB-4 has been commissioning and remains on track for initial delivery in late September. CB-5 is advancing towards initial energization in very early January. We remain confident in the revised delivery schedules and focused on converting the remaining contracted capacity at Lake Mariner into operating infrastructure and recurring revenue. With that, I'll turn it over to Patrick to review the financial results for the second quarter.

Thank you, Nazar. As Paul outlined, the quarter demonstrated both sides of our capital model, creating long duration contracted value and selectively recycling capital into larger scale opportunities that we directly control. Following quarter end, we entered into 2 transactions of significant financial importance. First, we executed a direct 20-year lease with Anthropic at the Justified data campus representing approximately $19 billion of contracted revenue over the initial term. Second, we entered into an agreement to sell our 50.1% interest in the Abernathy joint venture for approximately $530 million, representing a 20% internal rate of return on our initial investment. I'll focus my remarks today on our second quarter results, the financial impact of the FluidStack lease amendments, our updated Lake Mariner capital outlook and the liquidity available to fund our growth. Revenue for the second quarter was $44.8 million compared with $34.0 million in the first quarter, primarily reflecting additional HPC capacity coming online. HPC lease revenue increased 52% quarter-over-quarter to $31.9 million from $21.0 million and represented approximately 71% of total revenue. As Nazar described, the first data hall at CB-3 achieved ready-for-service status in late June and the second data hall followed in mid-July. As a result, the second quarter included only a partial revenue contribution from CB-3, while we entered the third quarter with 102 critical megawatts operating and generating lease revenue at Lake Mariner. Importantly, completion of CB-3 also satisfied the applicable conditions for $600 million of Google's credit support for FluidStacks lease obligations to become effective. This represents an important credit milestone and further strengthens the contracted revenue profile of the Lake Mariner build-out. The FluidStack lease amendments executed in early July also have several important financial implications. The revised commencement dates were mutually agreed with our tenant, and we remain on schedule with the revised time line. TeraWulf will contribute approximately $150 million to address tenant fit-out costs incurred through June 30, 2026. In return, Wulf Compute expects to receive more than $300 million of incremental lease revenue over the initial 10-year lease term. Together with the previously announced increase in contracted capacity from 162 to 168 critical megawatts at each of CB-4 and CB-5, the amendments are expected to generate more than $500 million of incremental lease revenue for Wulf Compute over the initial lease terms. Turning to operating results. Cost of revenue, exclusive of depreciation, increased to $12.4 million from $2.4 million in the first quarter. The increase primarily reflects lower demand response proceeds, which are recorded as a reduction in cost of revenue and declined to $2.8 million in the second quarter from $14.1 million in the first quarter. Operating expenses increased to $23.4 million from $11.2 million as we continued scaling the platform ahead of additional HPC capacity entering service. The increase primarily included $5.8 million of additional site level expenses, including security, labor and pre-revenue operating costs, $3.3 million of site preparation and demolition costs associated with future development and $2.2 million of minor equipment repair costs related to assets expected to be returned to service or sold. Reported HPC Leasing segment profit margin was approximately 28% during the quarter compared with our long-term target of approximately 85%. The reported margin includes approximately $2.8 million of tenant fit-out revenue and associated costs, $6.8 million of pre-revenue operating costs at Wulf Compute and $6.0 million of development costs across our portfolio of uncontracted development sites. Adjusting for these 3 items, HPC Leasing segment profit margin was approximately 80%. We expect margins to progress toward our long-term target as additional contracted capacity enter service, for revenue operating costs decline and the contribution from mature HPC lease revenue increases. SG&A expense decreased slightly to $126.9 million from $127.8 million in the first quarter. Excluding stock-based compensation and charitable contributions, adjusted SG&A was $28.6 million compared with $26.3 million in the prior quarter. We continue to expect full year adjusted SG&A to remain within our previously disclosed guidance range of $75 million to $100 million. Depreciation decreased to $21.2 million from $28.5 million in the first quarter. The first quarter included $11.9 million of accelerated depreciation associated with Bitcoin mining assets, whose useful lives were shortened as portions of the Lake Mariner Campus transitioned primarily to HPC use, compared with $2.6 million in Q2. Interest expense was $56.4 million compared with $67.1 million in the first quarter, and we recognized interest income of $28.9 million in Q2 compared to $29.4 million in Q1. Cash interest paid was $125.7 million compared with $5.3 million in the first quarter, reflecting the first semiannual interest payment on the Wulf Compute senior secured notes in April. We recorded a $755.7 million noncash loss from the change in fair value of the Google warrants compared with a $216.3 million noncash loss in the first quarter. The change was primarily driven by the increase in TeraWulf stock price and had no impact on our liquidity. Equity in the net loss of the Abernathy joint venture was $11.1 million, generally consistent with the $11.5 million in the first quarter. GAAP net loss attributable to TeraWulf was $939.9 million compared with $427.6 million in the first quarter. The increase was primarily driven by the noncash fair value adjustment associated with the Google warrants. Non-GAAP adjusted EBITDA was negative $18.3 million compared with negative $4.1 million in the first quarter, reflecting continued pre-revenue operating and development costs incurred ahead of additional contracted HPC capacity entering service. Now turning to the balance sheet. Cash and restricted cash totaled approximately $3.0 billion as of June 30. At the parent level, we held approximately $1.2 billion of unrestricted cash at quarter end. Including the initial $250 million payment received under the Abernathy transaction in July, unrestricted parent liquidity increased to approximately $1.45 billion. We expect to receive an additional $150 million on or before December 31, 2026, and approximately $130 million on or before April 30, 2027, subject to the terms of the transaction. At Wulf Compute, we had approximately $1.9 billion of gross cash at quarter end or approximately $1.5 billion after accounting for debt service reserves and interest during construction accounts. Approximately $2.3 billion of project capital expenditures have been completed with approximately $1.7 billion remaining. Approximately 2/3 of the remaining expenditures are committed, providing increased visibility into the remaining capital requirements. As a reminder, our original cost guidance for the Wulf Compute financing and deployment was $8 million to $10 million per critical IT megawatt. We currently estimate total project costs at approximately $9.1 million per megawatt within that original guidance range and modestly above the approximately $8.6 million per megawatt financed in October 2025. The execution factors Nazar discussed, including electrical labor constraints and evolving customer equipment and operating requirements are reflected in this updated estimate. Following the FluidStack lease amendments and TeraWulf's additional capital contributions, we expect the project's pro forma capitalization to be approximately 32% equity and 68% debt compared with approximately 26% equity and 74% debt at the time of financing. At the Justified Data campus, we have contributed approximately $353 million of equity as of June 30, including the $200 million site acquisition cost. These investments have funded the acquisition and early development work supporting the Anthropic lease and the planned project level financing. Based on our current plans and assumptions, our existing liquidity and expected Abernathy proceeds provide the capacity to fund our remaining like Mariner commitments, planned equity investment as justified, interim letter of credit requirements at Muskie, the proposed Chesapeake acquisition and other new sites we are actively pursuing without accessing the equity capital markets. Importantly, this plan also preserves a substantial liquidity reserve during the construction and delivery of these large complex projects. We remain focused on matching capital deployment with contracted customer demand, maintaining financial flexibility and selectively recycling capital when doing so improves control, scale and long-term shareholder returns. Over time, we also continue to target investment-grade credit profiles at the TeraWulf parent and each of our finance subsidiaries. In summary, the second quarter reflects a financial profile increasingly driven by long-term contracted HPC revenue. We entered the third quarter with 102 critical megawatts operating at Lake Mariner, greater visibility into our remaining Wulf Compute capital requirements and substantial liquidity to complete our contracted developments and fund the next phase of growth. With that, operator, we are ready to take questions.

[Operator Instructions] And our first question comes from Nick Giles of B. Riley Securities.

It's good to see the electric service agents for Kentucky Power. I was hoping you could speak to potential partnerships with utilities, what kind of framework should we have in mind? Should we expect that utilities are willing to share the economics of the project? Or would you kind of start at what we're seeing here in [indiscernible]?

Nick, it's Nazer here. So with the utilities, I think we're seeing a couple of different flavors come about. With the integrated utilities, Kentucky Power being an example and AEP being an example, I think they are independently solving for contracting for the load. So they've signed up [indiscernible] a lot of capacity with us under an LOA transmission agreement and then they go find the generation to support that. And so whether that comes from their existing resources, they contract for it. They recently acquired a power plant or they build more power plants. They're independently solving for that. And so what they're looking for us to do is to kind of commit to both whatever the transmission build-out is for that project. And so that will be project-dependent depending upon the location of that and where that sits within their grid. And then a backstop for the energy. And so part of the credit that we posted to EP was for the energy for the initial 500 megawatt allocation as well. And so again, the projects really depend upon the location, which will drive the cost of the transmission required to support it. And then it will be a market -- generally a market price on the cost of energy. When you put those 2 things together, that's where you see the credit that we've posted to Kentucky Power and AEP.

That's so helpful. I appreciate it. Maybe switching gears, Wulf has not done a deal direct with one of the HighIG hyperscalers. And so was curious if whether this is by design or what some of the key differences you see between the deals that you've done to date and one that would be with HighIG?

Yes Nick, it's Patrick. Florian for the question. So as I think you've heard from us many times, we are highly focused on credit quality of the tenant that's paramount to us. And so we have terrific tenants, both at Lake Mariner and at Hawesville. I think you saw us buy Hawesville in February and lease it less than 6 months later. That process was very robust and Anthropic was the winner of that. It's very strong economics to us, but there were a bunch of other competitors for that capacity in that process that we have moved over to Eastern Kentucky at Muskie. So I think, I would just say to you, we are extremely happy with our existing partners. They are very strong credits. We -- as you heard from us, we have the first slug of Google's backstop at Lake Mariner now effective. So I think it's a combination of credit quality of the counterparty and that's not just today, Nick, that's us thinking about the business model today, the competitiveness of that business model and then the credit, not necessarily immediately today, but also 3, 4, 5 years down the road, these are 20-year leases, right? So you have to be front foot forward, forward thinking. So as an example, as you've seen all the hyperscalers take on more debt, their balance sheets today are not going to be their balance sheets in 5, 6 years. So I think there's an element of us solving for all of those things as we're looking at tenants. But I think, stay tuned. And I think as we grow our site portfolio, naturally, the tenants will diversify.

And it's Paul here. It's the same from an operation and execution perspective just moving upstream to be closer to the ultimate customer. That enables precision and that enables us to be a better service provider to our customers. So we get to deal direct now with our customer Anthropic, and it just makes things that much more efficient in how we build out our facilities for them and how we operate the facilities for them.

The next question comes from Darren Aftahi of Lucid Capital Markets.

Just 2, if I may. So can you maybe balance just the appetite for executing on more sites versus kind of digesting what you have. I guess, said another way, how kind of full do you feel you are? Or are there limitations in kind of expanding the portfolio? And then maybe secondly, you talked a little bit about this, but you guys are operating in a few different geographies. Can you kind of talk about the calculus of what you look at from a sort of community and governmental risk perspective when you're thinking about entering into new or existing markets? And maybe if you had to characterize it, are there any markets where you feel more partial to versus others.

Darren, it's Nazar here. I'll take your questions in reverse order. First, with respect to just sites and locations and geographies, we've expanded into Kentucky. We received clearance from FERC in Maryland. And so we're traditionally looking for jurisdictions sites where there's been some activity previously. And so we've had a number of brownfield sites, which we think are well situated for further development. There's likely some significant electrical activity that occurred at that site, which bodes well for the future of the site with respect to kind of repositioning that. And so we're looking for areas where some activity has occurred, the local communities understand what that means and can see the vision of what that transformation or repositioning of that asset could look like. And so fortunately, us in Kentucky, whether it's in Hawesville, West of Louisville or in Muskie the eastern side of the state. We have very strong local support in both of those communities with respect to bringing those projects forward. And the other piece is, is that the team spends a tremendous amount of time engaging with the various local stakeholders and informing them of what we're up to. A lot of times we find that it's a lack of information that is a challenge more than just kind of what the information is. And so the team spends quite a bit of time in each of those local jurisdictions, ensuring that we're properly kind of conveying what we're seeking to do with respect to the projects. With respect to kind of just the overall portfolio, the guidance we've been giving is 250 to 500 megawatts per year of critical IT. We provide that guidance for a couple of different reasons. One is there's kind of just an operational capacity. Each of these projects at the upper end of the range is still nearly $5 billion of total capital. We have to fund that with both equity and debt. We've got to hire a number of contractors, electricians at our site in Lake Mariner. We peaked at over 1,000 electricians at the site. And so as you scale up the ability to kind of procure the requisite labor gets more challenging. So that's 1 kind of component to it. The second is, I think we've seen in the market especially here over the past couple of weeks and months is that these large-scale infrastructure projects may not just work on a linear scale. So a lot of times, we all look and say, okay, what's happening in this quarter, that quarter and try to roll it out 3 or 4 years. And given the size of these projects, we think there's going to be more fits and starts to it. And so trying to make sure that we pick our spots properly, have a good understanding. And I think as Paul alluded to in his intro comments is just a position in the Q does not represent access to power. So we really try to spend time ensuring that the projects that we're bringing forth have true -- the ability to really kind of deliver on that power, and we can capture it. And so therefore, we can go to our underlying customers and tenants and give them very clear visibility with respect to their ability to start using that. So I think there are a number of things that we're looking at that could increase that. But for now, we remain focused on the 250 million to 500 per year. With that, I think Paul has some of those thoughts as well to add.

Yes. This is Paul. Thanks, Nazar. I would only want to add to that, that I think regional diversity is a foundational principle in the development of our portfolio. I don't want to be reliant on 1 grid. I don't want to be reliant on 1 regulatory perspective or horizon. I don't want to be reliant on 1 political mindset. I think our customers will become increasingly sensitive to the notion of security. I'm a navy guy. And I remember back in the day when we were looking at submarine design versus what the Russians were doing, the Russians would put all their major equipment machinery in 1 part of the boat. So if you hit that part of the boat, they were dead in water. American submarine design was we would put major machine and readthrough out our boats so that we have the ability to sort of sustain ourselves in a conflict even if we took hits in 1 area of the boat. I think security is critical. Our customers don't want to be vulnerable to something that happens in 1 grid, 1 region, 1 fuel source. Labor sourcing, as Nazar mentioned, is important. And lastly, as you think about the move towards inference, I think folks want to move to the market as opposed to be in 1 place. Inference is more of a local consideration. So that's the reason why we're trying to build the portfolio as we have, and we'll continue to focus on regional diversity as a fundamental to what we do.

The next question comes from Michael Rollins of Citi.

So just building off of the last questions. I'm curious, if you take all that together, are you able to size what the incremental pipeline opportunity could be, maybe kind of thinking about it over the next decade? Currently, you've got 2.9 gigawatts of call it, line of sight of lease capacity and pipeline. Just curious what the TAM is, or how big that can get to? And then second, with certain regions seeing some new headwinds on timing, for example, recent developments in Texas or you mentioned and discussed earlier the implications of the New York Governor's actions. How is that affecting the conversation, demand, the interest to pre-lease with your portfolio?

Yes. This is Patrick Fleury. So we are a long-time power team, as you know. And so I think just -- maybe I'll kick it off and then Paul can clean up here. But we always try to frame for investors the power demand and power challenges, right, that the market is dealing with today. So if you step back and think about different power regions as an example, the state of California is, on a stand-alone basis, the fifth largest economy in the world. It has an 85 gigawatt installed grid. The Texas market has a roughly 95 gigawatt installed grid and probably average demand of around 65 to 67 megawatts because it's a peak year market and the system has to be designed for the highest draw day. The backlog in Texas, as we all know, as an example, is now over 400 gigawatts and Batch 0 is roughly 60 gigawatts. So just, again, to frame that, you basically have to build another California in the Texas grid to meet all of the Batch 0 projects. Combined cycles are 500 megawatts each roughly and take 3 years on average to build. So you got to build hundreds of combined cycles. So just I think it's important to kind of step back and frame that for folks because that's how we look at and approach each market or utility partnership or otherwise that we are in. And it's power first. Like is the transmission grid set up to accommodate our load, is the local generating system set up to accommodate our load? Can we get front-of-meter generation expansion at our sites as opposed to behind-the-meter and work with the local utility partners, right, to increase our capacity over time, not by limiting our customers to behind-the-meter single or double point of failure, but connected to the grid that has thousands of points of failure, but also not being a parasite on the grid and providing additional generation and even backup power during times of grid duress. So I think that's our -- in general, how we approach each of these sites, each of these markets from a power-first position.

Yes. And it's Paul. It's why I said in my remarks, it's nice to know that you're somewhere in the Q or that you're in Batch 0 versus some the batch. But we're all about available contracted power, and that's where we focus. You asked first about how big could this go? I don't have an answer for you. Demand is extremely strong at our Muskie site. We have the most active data room we've ever had and with world-class credits as potential customers. But I don't focus on that. I'm trying to -- I'm trying to focus on execution. And the simple response is, as long as we do what we have contracted right, then the customers will continue to come, and that is why Anthropic is a multiple repeat customer. We have guided the markets to 250 to 500 megawatts because that's what we're built for at this time, and we have reaffirmed that in my comments. Can we do more? Maybe with the right EPC contractor, somebody like Floor, with the right region where the labor is available, with the right mature and sophisticated regulatory framework and policy, absolutely. That's why Lake Mariner and Cayuga, Lake Hawkeye worth so much more money today as a result of some of the things that Governor Hocol is talking about. But we're focused on execution. And as long as we could eat what we have on our plate, then we can ask for more in the next round of service. In terms of dialogue, what's changed? For us, not a whole lot. We think about dialogue in these projects in 2 primary ways. One is with the community in the region that we're at. We've always -- because we are power folks we've always developed power plants with a great level of sensitivity to the region, to the local community and sensibility towards what the regulatory framework is. Likewise, we're talking to our customers about it. These customers are really, really smart. They know the difference between a Q position and a batch position versus a contract with an investment-grade credit to supply GigaPower. That is where they are focused, and that's how they're prioritizing their time. So I think it's one reason why Muskie is seeing the kind of action it is in the data room today is because people recognize when that project could come online and that it's a very credible project. So we're excited about where the market is today, and we look forward to continue to participate in its growth.

The next question comes from Tim Horan of Oppenheimer.

A question on execution, really. Obviously, the demand is incredibly strong and it's relative to execution as a question. But I mean, where are you guys or the industry? Where are we getting more electricians and HVAC trades been, et cetera? And you have the cost kind of locked down for them. I guess, especially on the Anthropic contract, do you have the construction contracts locked down at this point. And one of the reasons I mentioned, I mean, Elon Musk last night from SpaceX is talking about building up 10 gigawatts a year of capacity. I mean, how does the industry find the people to do this? And how do you compete against others looking for the same workers?