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Bitcoin mining facility owner may file for bankruptcy

Bitcoin mining facility owner may file for bankruptcy

Bitcoin mining facility owner may file for bankruptcy
November 17
12:00 2022

Core Scientific Inc. announced on Oct. 27 they might file for bankruptcy after citing rising energy costs and the decreasing price of bitcoin

The company, a cryptocurrency miner, leased 31 acres of land from the city of Denton to house a blockchain data center in October 2021. They lease Denton’s dark fiber and unused fiber cables and use excess capacity from transmission assets, Denton Municipal Electric general manager Tony Puente said.

“So we had basically three assets that weren’t producing any money at all, and this facility came in and filled that gap,” Puente said.

Core Scientific’s shares dipped to 16 cents as of Nov. 3, one week after the announcement sent their stock value down to 22 cents. The company’s market value has decreased from over $1 billion to $100 million since last summer. They are looking to restructure long-term debt according to their filing.

The company’s shares plummeted this summer for the same reasons it has now considered filing for bankruptcy. The current price of bitcoin is about $20,000, which is less than half of what it was valued at when they were negotiating to lease Denton’s fiber optics. 

Core Scientific did not respond to requests for comment.

“Whether we made $1 or we made, you know, [a] couple million dollars, [that’s] still better than the $0 that we were making before,” Puente said. “You […] understand that every dollar that’s made [at the facility] from selling electricity goes back to benefit our existing ratepayers.” 

Because Denton’s facility is being paid for and sustained by Core Scientific, their bankruptcy would not be as damaging as directly investing in crypto, Council Member Brian Beck said.

“None of this was at any cost,” Beck said. “Had we done something really foolish, like invest in crypto or stock instead of a payment — the city didn’t structure anything to put us on the hook as it were for, for any payments, for any outlay, for any upgrades.”

The approval of the data center was to cover long-standing debt created by other projects including coal and natural gas plants, former Council Member Deb Armintor said. Core Scientific also offered to put aside money for a sustainability fund, she said.

“City staff had to take that money promised for the sustainability fund out of existing city resources anyway to start the sustainability fund,” Armintor said. “Before they said, ‘Oh, the only way we can afford this is to [build the data center].’ So we have this sustainability fund that was made possible, not by this crypto mining deal, but by staff reallocating the budget to make it happen.” 

DME estimated $10 to $12 million in revenue may now be down to $6 to $8 million, Puente said. Currently, the facility is still operational and generating revenue at 125 megawatts, under half of what it is projected to produce at 300 megawatts. All the power is 100 percent offset by renewables. 

“This 300 megawatts of facility, if it does fully develop, will be a large facility that somewhere else wouldn’t be green, but because it’s here in Denton, we’re able to do that,” Puentes said. “I think we’re very proud of that.”

Other cryptocurrency companies may try to fill the void left by Core Scientific if it goes bankrupt, Armintor said. 

“You think okay, now at least [the city] learned their lesson, but I haven’t seen much lesson-learning you know,” she said. “We should not take gambles on any kind of private corporation — let alone one that’s going to double our energy footprint.” 

No other data mining operations have made contact with the city or DME, and the city is not seeking any replacements, Beck said. Right now, the future is uncertain for the facility and whether or not it will remain. It all depends on how Core Scientific chooses to proceed. 

“The company is trying to remain a company,” Puente said. “What other deals they may or may not be working on, that’s certainly within their sphere. What I tell people all the time is — We’re in the business of selling electricity and making sure that it’s reliable and it’s affordable.”

The idea was to invest in energy and a long-term revenue stream from the facility, Beck said. It is what convinced him to vote in its favor. Beck sees the community’s concern regarding crypto and says he was also skeptical. He thinks of the facility as an asset like any other and that crypto itself should be regulated. 

“Would the community have reacted the same if it was a Google data center or biomedical facility?” Beck said. “No, that’s because crypto is a little shady. Ultimately, the problem would be the same.”

Featured Image: Core Scientific’s facilities on Nov. 8, 2022. Photo by Matt Iaia

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Giovanni Delgadillo

Giovanni Delgadillo

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