Out of Compute North’s Bankruptcy Rises a 300MW Bitcoin Miner With a Novel Energy Offering

Crypto winter casualty

The site in Corpus Christi that Saxet is building also took a hit from this common hosting conflict.

Compute North, which had been one of the largest players in the hosting business, filed for Chapter 11 bankruptcy in September 2022. A declining bitcoin (BTC) price and the company’s relationship with its biggest lender, Generate Capital, which ended up taking over Compute North’s stake in another two of its sites, were partly to blame.

But another problem was that Compute North’s services agreements didn’t allow it to pass through energy costs. The company could only turn off its customers’ machines when energy prices exceeded a certain level. “While this mechanism helps to manage expenses during a period of high power costs, it is not an effective strategy for addressing long-term energy price increases,” Compute North Chief Financial Officer Harold Coulby said in a filing with the U.S. Bankruptcy Court in southern Texas.

Two of Saxet Infrastructure’s executives, CEO Steve Quisenberry and Chief Operating Officer Matt Held, were also partners at Bootstrap Energy, a company that Compute North had hired to develop the Corpus Christi site in March 2022. Bootstrap Energy also owns the land that the site is on. Shirole left Compute North in December 2021 and has filed an employment discrimination lawsuit against the firm.

Compute North stopped paying the development firm in the summer of 2022, and as of the bankruptcy date, it hadn’t made $14.9 million in payments. The bankruptcy court rejected the development contract, and so Bootstrap Energy was back on the saddle to develop the site.

Location, location, location

The site’s location provides several advantages, Held said. The relatively moderate temperature in the south of Texas, near the sea, is much cooler than other parts of Texas, including West Texas where a lot of miners have flocked. It is also situated at lower altitude, making for denser air. The lower temperatures and more humid environment helps reduce the costs of cooling machines.

The area is also home to almost 7 gigawatts of wind power generation, with winds not dying down in the afternoon, as it does in West Texas, Held said. Demand for electricity in the area is fairly stable because it is home to industrial facilities that require stable amounts of power throughout the day and few population centers, he said.

Looking ahead

The site is still under construction and the Saxet team is now signing contracts with tenants. Saxet has secured all the capital needed for the construction of the site from a New York multibillion-dollar private-equity firm and a private investment group. The funding will be released once Saxet has reached a minimum scale of customers, Quisenberry said.

The new firm expects the full 300 MW of hosting capacity to be up and running by the end of the year.

Saxet is taking contracts only for larger than 25 MW from institutional clients in order to be able to execute its tailor-made power management strategies, Shirole said.

“Quite a few of the large-scale miners that we’ve walked through the structure on this, truly view this as the future for at-scale mining,” Shirole said.

The strategy, however, can also change over time as both the market and regulations change, and customers will be reviewing their power strategies on a regular basis, the Saxet executives noted.

“The full transparency of energy pricing with our clients is the key to what we’re doing,” and for the industry in general, Quisenberry said.

Source