WULF

1. Executive Summary

• TeraWulf accelerated its transition from primarily Bitcoin mining to long-duration, contracted high-performance compute (HPC) hosting, underpinned by sizable capital raises and blue-chip partner support.
• Most recent updates highlight a closed $1.025 billion 0.00% convertible notes financing, a new 168 MW AI compute joint venture (JV) at Abernathy, TX with ~$9.5 billion contracted revenue over 25 years, and preliminary Q3 2025 results showing strong top-line growth and improving EBITDA.

Key Takeaways

• Closed $1.025B 0.00% convertible notes (due 2032); net proceeds of ~$999.7M earmarked for the Abernathy, TX campus and corporate purposes.
• Contracted HPC platform >510 MW, including a new 168 MW JV with Fluidstack at Abernathy (51% WULF stake), targeted for 2H26 delivery; Google backs ~$1.3B of Fluidstack’s lease obligations supporting project debt.
• Prelim Q3 2025 revenue $48–$52M (≈84% YoY) and adj. EBITDA $15–$19M, reflecting early HPC pivot benefits and improving operating leverage.
• Targeting to contract 250–500 MW per year going forward, with multi-site expansion led by Lake Mariner (NY) and Abernathy (TX); Cayuga (NY) leased for up to 400 MW (138 MW power ready 2026).

2. Financial Performance

Capital Raises & Proceeds

• 2025-10-31 (CLOSE): $1.025B 0.00% Convertible Senior Notes due 2032; net proceeds ≈ $999.7M. Use of proceeds: fund Abernathy campus and general corporate purposes. Terms (from 10/29 pricing):
• Initial conversion rate: 50.1567 shares per $1,000 (conversion price ≈ $19.9375, ~37.5% premium to $14.50 close on 10/29/25).
• Redeemable for cash on/after May 6, 2029 (stock-price conditions); mature May 1, 2032.
• 2025-10-16 (PRICED): $3.2B 7.750% Senior Secured Notes due 2030 (WULF Compute) at par; proceeds to finance Lake Mariner data center expansion; security package includes first-priority liens and certain Google warrant pledges prior to completion; expected close 10/23/25.
• 2025-08-22 (CLOSE): $1.0B 1.00% Convertible Notes due 2031 (full greenshoe exercised); net proceeds ≈ $975.2M; capped call cost $100.6M; conversion price ≈ $12.43 (from 8/18 terms).
• Balance sheet signaling: the 0% coupon 2032 converts at a premium indicates constructive institutional demand; secured notes pricing reflects traditional project-style financing aligned to contracted HPC cash flows.

Early Revenue Initiatives

• HPC hosting ramp: Company began recognizing HPC hosting revenue in Q3 2025 (consistent with prior guidance).
• Preliminary Q3 2025: Revenue $48–$52M (vs. $27M in Q3 2024) and adj. EBITDA $15–$19M (vs. $6M in Q3 2024), reflecting:
• Early monetization of Lake Mariner HPC repositioning.
• Growing base of long-duration, investment-grade-backed contracts (Fluidstack, Core42/G42).

Expense Management & Cash Flow

• EBITDA trajectory improving: Q1 2025 adj. EBITDA ≈ $(4.7)M; Q2 2025 adj. EBITDA $14.5M; Q3 2025 prelim $15–$19M.
• Operating leverage expected to improve as contracted HPC mix rises versus more volatile mining revenues; site-level targets include high NOI margins (projected ~85% from Aug-14 agreements) and low power costs (e.g., Cayuga <$0.05/kWh).
• Capex visibility: Abernathy JV cost estimate $8–$10M/MW (168 MW implies ~$1.3–$1.7B at the project level), supported by project financing and Google-backed lease obligations.

3. Guidance and Future Outlook

Production Ramp–Up

• Abernathy, TX (JV with Fluidstack, 168 MW): Facility expected online in 2H 2026; WULF holds 51% and the exclusive right to partner on the next ~168 MW Fluidstack-led project.
• Lake Mariner, NY:
• CB-5 (160 MW) operations expected 2H 2026 (Fluidstack expansion).
• Prior plan included ~40 MW initial HPC online 1H 2026, with fuller deployment by YE 2026 (subject to customer pacing).
• Contracted platform exceeds 510 MW; management operating at a commercial run-rate with annual MW contracting cadence.

Expansion Plans

• Annual contracting target: 250–500 MW per year.
• Cayuga, NY: 80-year ground lease for ~183 acres; scalable to up to 400 MW; 138 MW power anticipated ready 2026.
• Right to develop subsequent phases at Abernathy under the JV; additional options at Lake Mariner (interconnection secured for 500 MW, targeting up to 750 MW).

Operational Targets

• Efficiency/margins: Projected ~85% site NOI margins for signed HPC agreements (Aug-14).
• Cost discipline: Utilization of zero/low-coupon convertibles to limit near-term cash interest; secured project debt aligned to asset cash flows.

4. Strategic Positioning and Initiatives

Cost Management

• Leverage low-cost, predominantly zero-carbon power across NY sites; Cayuga guided at <$0.05/kWh.
• Capital structure optimized with 0.00% converts and project-level secured notes, reducing cash interest burden while funding growth.
• Ongoing miner fleet optimization and power procurement discipline to moderate BTC mining cost volatility.

Product Development

• Purpose-built HPC infrastructure: closed-loop water cooling, dual 345 kV transmission at Lake Mariner, ultra-low-latency fiber, and GPU cluster suitability.
• Repositioning of Lake Mariner capacity from mining to Tier 3+ HPC workloads, adding dedicated data halls.

Market Expansion

• Fluidstack: Multi-asset partnership—Lake Mariner (CB-3/4/5) and Abernathy JV; WULF’s exclusive right on the next ~168 MW project.
• Core42 (G42): Anchor leases at Lake Mariner with expansion options.
• Google: Material lease backstops (now totaling ~$3.2B across projects) and warrant pledges supporting secured financing.

5. Competitive Positioning and Market Trends

Market Positioning

• Transitioning into a scaled HPC/AI infrastructure provider with one of the largest contracted HPC footprints in the U.S. (510+ MW), anchored by investment-grade counterparties and long-duration contracts.

Competitive Strengths

• Power advantage (low-cost, zero-carbon), transmission scale, and cooling/fiber readiness for high-density GPUs.
• Contracted revenue visibility (multi-year/decades), and credit enhancement via Google-backed lease obligations.
• Vertically integrated energy and infrastructure expertise, improving execution speed and cost control.

Emerging Industry Trends

• Rapid AI/HPC compute demand growth favoring operators with scalable power, cooling, and quick-to-market capacity.
• Project finance and 144A markets enabling large-scale capital formation for data center buildouts.
• Tenant preference for long-duration commitments with credit structures that support non-recourse/project-level financing.

6. Technology and Innovation Strategy

Technological Advancements

• Deployment of high-density, liquid-cooled data halls designed for next-gen GPU clusters.
• Site-level innovations at Lake Mariner: dual 345 kV transmission, closed-loop cooling, and network/fiber optimizations.

New Product Developments

• Dedicated HPC halls transitioning capacity from mining to colocation/hosting.
• Abernathy campus buildout via JV structure to accelerate GPU-ready capacity.

Alignment with Market Needs

• Infrastructure tailored to foundation model developers and AI training/inference workloads.
• Scale, speed-to-market, and predictable power economics align with hyperscaler/AI lab requirements.

7. Risk and Reward Analysis

Growth Catalysts

• Commissioning of Abernathy (168 MW) in 2H 2026 and Lake Mariner CB-5 (160 MW) in 2H 2026.
• Continued annual contracting (250–500 MW) with existing partners and new enterprise/Hyperscale customers.
• Potential follow-on phases at Abernathy under JV rights; Cayuga ramp beginning 2026.

Downside Risks

• Construction/commissioning risk and potential schedule slippage (labor, supply chain, permitting).
• Financing execution and cost of capital; leverage from $3.2B secured notes (7.75%) introduces fixed-charge coverage sensitivity.
• Counterparty concentration and performance risk (Fluidstack, Core42); reliance on lease backstops (e.g., Google).
• Power price volatility/regulatory developments in NY; dilution risk from converts at $12.43 (2031) and $19.94 (2032) conversion prices.

Valuation Metrics

• Framework (data-driven, scenario-based):
• Abernathy JV: ~$9.5B over 25 years ⇒ ~$380M/year contracted revenue to the JV. If site NOI margins approximate ~85%, implied site NOI ≈ $323M/year. WULF’s 51% economic interest ≈ $165M/year before project debt service and corporate overhead.
• Lake Mariner (Fluidstack expansions): management disclosed $6.7B contracted revenue with potential to $16B (with extensions). Annualization depends on contract terms; apply similar NOI margin assumptions with caution.
• EV/EBITDA approach:
• Use a 2027E “stabilized” EBITDA that includes contributions from Lake Mariner HPC plus Abernathy (post-2H26 ramp).
• Apply peer HPC/data center EV/EBITDA multiples appropriate for long-duration contracted cash flows.
• Convert “signals”:
• 2032 converts priced at ~$19.94 conversion; 2031 converts at ~$12.43 provide bookend reference points for long-term equity optionality embedded in debt financing.
• Note: A precise P/E or EV/EBITDA multiple requires current market cap, net debt, and share count; investors should update with live market data and pro forma debt from the 2025 financings.

8. Investment Thesis

Investment Rationale

• Rapidly expanding, contracted HPC platform (>510 MW) with long-duration revenue, investment-grade support, and asset-level financing provides visibility and resilience.
• Access to low-cost, zero-carbon power, transmission scale, and purpose-built cooling/fiber create durable unit economics and competitive moat.
• Capital stack supports growth: 0.00% converts reduce cash interest; secured notes align financing to asset cash flows.

Price Target Justification

• Anchor on a sum-of-the-parts:
• Stabilized HPC EBITDA (Lake Mariner + Abernathy) using contracted revenues and site NOI targets, less project debt service and corporate costs.
• Residual Bitcoin mining contribution (optionality, cyclical).
• Apply a contracted-infrastructure multiple to stabilized HPC EBITDA and a lower multiple to mining EBITDA.
• Cross-check against the 2031/2032 convert conversion prices as long-dated market-cleared valuation reference points.

Influencing Market Dynamics

• AI capex cycles, GPU availability, and power market conditions will drive demand and pricing power.
• Interest rates impact project financing costs, valuation multiples, and convert optionality.
• Counterparty credit and contract tenor influence financing efficiency and equity value realization.

9. Macroeconomic and Industry Trends

Regulatory Changes

• Favorable alignment with zero/low-carbon power strategies in NY supports permitting and stakeholder acceptance for HPC growth; ongoing compliance critical as policy evolves.

Supply Chain Dynamics

• Large-scale GPU/AI server procurement and electrical equipment lead times are key schedule determinants; early contracting and JV structures mitigate some timing risks.

Technology Adoption Trends

• Accelerating AI/HPC workloads and the shift to high-density, liquid-cooled deployments benefit operators with scalable power, cooling, and fiber—matching TeraWulf’s design focus and expansion roadmap.