New Era Energy & Digital Q3 2026 Earnings Call Transcript

New Era Energy & Digital (NASDAQ:NUAI) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

New Era Energy & Digital reported significant progress on their TCDC project, securing a 20-year PPA for up to 207 megawatts and posting a $118 million cash-collateralized letter of credit.

The company is in advanced lease negotiations for Phase 1 of TCDC, with a prospective tenant under a non-binding LOI covering both Phase 1 and Phase 2.

Management highlighted a modular build approach for Phase 1, expecting a substantially lower build cost and faster completion than traditional methods.

A $64 million PIPE was closed to repay debt and support leasing and development activities, leaving the company with $187 million in cash and a clean balance sheet.

Phase 2 plans involve approximately 550 megawatts of new on-site generation, with commercial negotiations ongoing.

New hires from major tech companies like Microsoft and Meta have been added to strengthen the execution team.

Community engagement and sustainable development are emphasized, with plans for reusing water from the oil and gas industry for industrial cooling.

The company’s future outlook remains focused on completing the Phase 1 lease and securing financing, with power availability targeted for Q3 2027 and initial service by Q4 2027.

Full Transcript

OPERATOR

Good day and thank you for standing by. Welcome to New Era Energy & Digital’s third quarter 2026 business update conference call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.

Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Lincoln Tan, Investor Relations at New Era Energy & Digital. Please go ahead.

Lincoln Tan (Investor Relations)

Thank you, operator, and good morning. My name is Lincoln Tan, Investor Relations for New Era Energy & Digital. Thank you for joining our third quarter fiscal 2026 business update call. Joining me today are Charlie Nelson, Chairman and CEO; Ted Warner, President and CFO; Jose Rodriguez, Chief Operating Officer; and Evan Pearce, Chief Development Officer. Before we begin, I’d like to remind everyone that today’s call is being recorded and will be available on the Investor Relations section of our website. For those dialed in by phone, you can elect to ask a question through the moderator after our prepared remarks.

Certain statements made on this call that are not historical facts, including those related to our future plans, objectives, and expected performance, are forward-looking statements. These forward-looking statements represent our outlook only as of the date of this conference call. While we believe any forward-looking statements made on this call are reasonable, actual results may differ materially because these statements are based on our current expectations and subject to risks and uncertainties.

These risks and uncertainties are discussed in our filings with the SEC, including our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. You should refer to and consider these factors when relying on such forward-looking information. Any forward-looking statement made speaks only as of the date on which it is made, and we do not undertake and expressly disclaim any obligation to update or alter our forward-looking statements whether as a result of new information, future events, or otherwise, except as required by applicable law.

So with that, I’ll now turn the call over to Charlie Nelson.

Charles Nelson (Chief Executive Officer)

And thank you, Lincoln, and again thanks everyone for making the time here. So we’re going to go over everything to date at TCDC and where we are as a company during this call. We’ve made a lot of important progress at TCDC during Q3 and into Q4. We’ve secured the power in our own name. We’re rapidly progressing lease negotiations and strengthening the team and balance sheet really needed to move this project towards final delivery. That progress comes against a challenging backdrop.

We’ve had multiple black swan events. The capital markets have been volatile and investors are asking harder and harder questions about how data center projects will be funded and delivered. And, you know, communities want to understand what these developments mean for their electricity supply, the water resources, local infrastructure, and essentially a social license to operate in these different communities that we’re in. And we believe that that environment makes the quality of our power position and our development approach and contracting approach increasingly important.

And so since our last update, we’ve signed a 20-year PPA for up to 207 megawatts. In conjunction with that, we posted a $118 million cash-collateralized letter of credit to be able to hold that power, which we have already completed. The power availability is expected in Q3 of 27. And this power, again just to remind everyone, is through an existing grandfathered private use network which is not subject to Batch 0 constraints within Texas, and it allows us to have this ready-for-service date in Q4 of 27.

And we believe that we have one of the more valuable power positions at a time when customers have kind of limited alternatives on that timeline. And additionally, there are many of those in the Batch 0 process who are facing uncertainty around the magnitude and the timing of their power. And so we’re just looking at the rest of the market adding and compounding risk with these countless data center projects that are up for probating, and we’re sitting here relatively insulated.

And so with our permits pertaining to phase one in hand and adjacent generation plant and phase one power as part of an existing and seasoned private use network outside of the batch process, we believe the timing and certainty of our project have made TCDC an even more attractive asset going forward. And so the task now is to translate our position into a definitive lease, and we can go through what we’re doing there. Look, but this is a financial development plan and ultimately we want to communicate what this means in terms of earnings to our shareholders.

So shortly after the PPA announcement that we made in September, we signed a non-binding LOI that covers both TCDC’s phase one and phase two with the same prospective tenants. You know, we are now in advanced negotiations with the phase one lease and the phase two lease documentation is being worked on concurrently but separately. And it’s important to note that phase one can proceed without phase two documentation being fully complete. So those are mutually exclusive.

They’re not reliant on each other. And so for phase one, you know, we believe that the proposed modular approach that we’ve referenced in our business updates, historically speaking, offers a substantially lower build cost as well as an accelerated timeframe. And, you know, since then we’ve added experienced development and construction professionals that will go over the whole new team to what we believe is already a best-in-class team. To support our work on both phases, we also strengthened our balance sheet.

Recently we did a $64 million PIPE and that was used to pay down debt and support leasing and development activities. Now we sit here with a clean balance sheet and a project that we believe is arguably one of the most favorable in the country in the current market and beyond. We believe that what we have done has given us a strategic advantage heading into the next phase of the company. So today we want to connect all these pieces for everyone because a lot’s been going on: the power that we’ve secured, how we plan to deliver the project, our partnership model, how we intend to fund it, and our immediate priority is completing the lease obviously and putting the financing and delivery arrangements around it, giving shareholders a clearer view of the capital required and ultimately what the potential returns are.

And so before going into this project detail, I’m going to hand it over to Evan right now to address directly our approach to responsible development and how we’re approaching power, the water stewardship, and giving the local community a seat at the table, which is really what’s the world that we’ve been planning and living in. And we’re excited to just talk through this. So with that, I’ll hand it over to Evan real quick. Evan, go ahead.

Evan Pearce (Chief Development Officer)

Thanks, Charlie. I was born in Texas, I was raised in Texas, and my family lives in Texas, so these issues are important to me. Our team has deep experience in both data center development and sustainability. That experience has reinforced how critical it is to strategically address power, water, and community needs at all stages of development, including site selection, land development, design, construction, and operations. New Era Energy & Digital’s approach to TCDC is aligned with Governor Abbott and Governor-elect Henos’ priorities and concerns for utility ratepayers, water, and local communities.

This is not reactionary. This is how we approached TCDC from the outset. Stewardship was core to our development philosophy well before these issues became a prominent part of the data center debate. Regarding power, our strategy is designed to avoid increasing transmission costs for Texas ratepayers. Phase one uses an existing utility connection via a behind-the-meter private use network. For phase two, we plan to bring new islanded on-site generation to power the rest of the site. Addressing water, we simply plan on deploying closed-loop cooling to limit consumption at TCDC. That being said, I want to highlight a unique and underappreciated feature of the Permian Basin.

This region generates a significant amount of produced water from the oil and gas industry, and we’re partnering with Texas regulators and the University of Texas to evaluate how that water can be treated and reused for industrial cooling, with the aim of reducing demand on local freshwater supplies while also lowering the volume sent to disposal wells. Finally, we agree that Texans should have a seat at the table. New Era Energy & Digital continues to engage directly with Ector County, the City of Odessa, as well as local businesses and community organizations. We’re aiming for maximum transparency, want residents to understand the development, and provide opportunities to raise questions as our plans take shape. Our project is supporting local jobs, and we want to continue to work with local suppliers and contractors whenever that makes sense.

These principles will continue to guide us as we develop TCDC. Now let me explain phase one power in more detail. Phase one will be served via an executed PPA for up to 207 megawatts. This power is part of an existing registered private use network supplied by Vistra’s adjacent Odessa Ector Generating Station. It’s essentially a behind-the-meter arrangement with friendly meter reliability, and phase one power is not contingent on progressing through ERCOT’s Batch 0 process. During Texas Senate Bill 6 implementation, the Texas Public Utility Regulatory Act, or PURA, was amended and exempts net metering arrangements registered with ERCOT prior to 2025 from the batch process.

This is why we feel that TCDC is both unique and valuable. More recent commercial discussions continue to reinforce the value of near-term power across the United States. New data center capacity in 2027 is extremely constrained due to power. We believe the combination of contractor supply, scale, and expected Q3 2027 availability makes TCDC particularly relevant to those customers. Additionally, our partnership with Vistra supports future power development, and there’s an alignment of interest here. Vistra has been a great partner, and once power delivery begins they will receive a 5% non-voting stake in the phase of power. As partners, our goals are aligned, and they have a direct interest in the long-term success of development. Customers understand this and it is a relevant consideration for how they could expand their footprint at the campus over time.

And of course delivering on that opportunity takes an experienced team. Charlie, over to you.

Charles Nelson (Chief Executive Officer)

Thanks, Evan. At our Q2 update we introduced several of the new senior leaders who had joined the team here at New Era Energy & Digital. Since then we’ve continued to add technical depth around them. The roles span everything from development, engineering, construction, power operations, et cetera. These are people who understand firsthand what needs to happen between just securing a site and bringing a facility into full service. And these are obviously giant projects.

So just to highlight a few examples, we brought on Erin Henderson. She’s our Senior Vice President of Energy and Policy, who joins us from Microsoft, where she is the Director of Data Center Flexibility and Energy Infrastructure. We’ve got Marlene Billington, our new Vice President of Engineering and Operations, who joins us from Meta, where she is a critical operations manager. We have Morgan O’Connor, our new VP of Construction, who joins us from AWS, where she was Senior Manager of Construction, running a lot along their critical Eastern Seaboard.

We have Doug Hofmuckle and Maria Rodriguez, our mechanical and electrical engineering leads bringing experience from Meta, ByteDance, Amazon, Microsoft, and Dana Herrick, our Director of Physical Security, who previously led global security operations at CyrusOne, who’s obviously a fantastic legacy operator. Finally, just this week, we’re excited to announce Ashley Alleman, our new General Counsel, who joins our executive leadership team from Clean Arc Data Centers, who has also had previous roles at CyrusOne and Vistra.

So just a whole ton of relevant experience here. Look, we need this collective experience as a company throughout project planning, site preparation, construction, commissioning, and our team needs to fully understand the detail and nuance around delivery obligations that we are taking on, and really the intent is to test whether the proposed schedule is achievable and to coordinate with many of the other parties that are involved to aid in this seamless execution. And, you know, we’re building these capabilities obviously for TCDC, but it’s not exclusively for TCDC.

You know, we’re building this platform, and I know we’ve talked about it before, but we’re building a platform that enables us to continue to execute confidently with our counterparties and tenants that will not require us to rebuild the team every single project. And so, just to talk through some of the Phase 1 delivery approach, I’m going to hand this over to Jose and then he can cover some of that.

Jose Reynaldo Rodriguez (Chief Operating Officer)

Thanks, Charlie. The team you just introduced brings direct experience building and operating large data center campuses. Let me explain how we’re applying that experience to our own delivery approach. We are in advanced negotiations on definitive Phase 1 lease around a proposed modular approach, which we think makes sense for a number of reasons. From a physical construction perspective, modular means completing more work off site while site preparation progresses in parallel.

That gives us better visibility over production schedules and can shorten the path to commissioning. It also reduces our reliance on large on-site construction crews, helping us manage the risk of labor shortages as competition for skilled data center workers remains elevated. We’re working with multiple vendors across various parts of the supply chain and designing for flexibility as customer hardware requirements evolve. We’re also working through long-lead equipment requirements, including transformers and other enabling electrical infrastructure. The networking and physical security specialists we have onboarded are also involved in the design and we’re planning for testing and commissioning from the outset. The aim is to identify and manage dependencies early on to reduce the risk of late changes impacting delivery timelines.

Ted, over to you on the economics and capital requirements.

Ted Warner (Chief Financial Officer)

Thanks, Jose. Based on our initial estimates, we expect the Phase 1 build cost to be less than half that of a comparable traditional development. At the same time, we’re negotiating what we believe are attractive lease economics that reflect the value of our near-term power and the current state of the market from a cost of capital perspective, focusing on maximizing our return on equity dollars. Alongside the build costs and lease economics, we’re also seeking to negotiate favorable timing for capital outlays, leveraging tenant relationships for design and supply chain, all with the aim of limiting the funding New Era Energy & Digital needs to provide even in the near term post signing of a Phase 1 lease. Ultimately the overall funding requirement will depend on our agreed scope, payment timetable, and allocation of delivery responsibilities.

Once the agreements are finalized, we’ll be able to explain these commitments and the economics in far more detail. What we can say now is we are working tirelessly to get all the details finalized for Phase 1 lease execution. Evan, over to you for an update on the site itself.

Evan Pearce (Chief Development Officer)

Thanks, Ted. Alongside the commercial work, we’re making tangible progress on site and continue to de-risk the asset. We own 493 acres and are under contract with Grow Odessa to acquire another 99 acres. We have an executed PSA, we’ve paid the deposit and expect to close in the coming weeks. That acquisition is expected to reduce easement constraints and increase the site’s capacity potential. We secured key site approvals and site preparation is already underway, including clearing and grading.

The team has also carried out significant cleanup, remediation, and removed thousands of feet of pipeline. The photographs on this page show some of that progress. Our next major commercial milestone remains the definitive Phase 1 lease and we’re in advanced negotiations on that documentation alongside the financing and delivery work streams. Our timing remains unchanged. Power availability is expected in Q3 2027 with initial ready-for-service targeted for Q4 2027. That brings us to the expansion opportunity alongside Phase 1. Turning to Phase 2, we’re planning for approximately 550 megawatts of new on-site generation with Thunderhead Energy Solutions.

The intention is to create an islanded solution supplying power directly to the campus that is not subject to the risk associated with the ERCOT batch process. Together with Phase 1, that would take planned capacity across the first two phases to approximately 757 megawatts gross. A Thunderhead subsidiary has filed the standard air permit application with the Texas Commission on Environmental Quality and we still believe that permit will be approved.

From a timing perspective, we expect deliveries in Q4 2027 and Q1 2028. Commercial negotiations continue to progress with the same prospective tenant as Phase 1, and we’re working through separate lease documentation for Phase 2. We anticipate a similar build cost for Phase 2, which, as Charlie mentioned, would be substantially lower compared to a traditional development. Beyond the first two phases, we’re evaluating the campus layout as a whole to maximize the capacity the site could support.

Phase 3 remains in design and its ultimate capacity will depend on the layout and the density we can achieve. Our immediate focus remains on Phases 1 and 2. Now I’ll hand it back to Ted to discuss our financial position and approach to funding development.

Ted Warner (Chief Financial Officer)

Thanks, Evan. How we fund TCDC will have a direct bearing on the value we create for shareholders in a volatile market. We have to balance the capital needed to move the project forward with the cost and risk of raising it. A couple weeks ago, we closed a $64 million PIPE to repay Macquarie borrowings that helped fund the credit support for our Vistra PPA, preserve cash for the next stage of development and ultimately support our leasing work streams.

Turning to the balance sheet, we believe we’re in a strong cash position post capital raise, giving us ample flexibility as we work toward lease execution and arrange project financing. As of October 31, we had a total of $187 million in cash, comprising $49 million of unrestricted cash and $138 million of restricted cash, including collateral supporting the PPA letter of credit. We also have $20 million outstanding debt on our Macquarie facility, which is fully cash collateralized.

After lease execution, we believe we will have various options to restructure the LC arrangements with the aim of releasing some of our restricted cash while maintaining the required credit support, allowing us to put more of our existing cash to work on development. On project funding, we retain the option for up to $200 million of financing under the Macquarie facility following lease execution subject to the applicable conditions. We are also in discussions with other potential lenders on larger pre- and post-lease debt funding partnerships with the aim of getting credit instruments in place fit the agreed development scope and timing of both Phase 1 and 2. That covers our financial update. Operator.

OPERATOR

Open the line for questions. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Mike Rondon with North. Your line is open.

Mike Rondon (Analyst)

Hey guys. Thank you. It was highlighted that you expect that Phase 1 build cost to be about 50% below traditional builds and that the timing of capital outlays was kind of limited up front. With that, this color kind of alludes to a similar structure that Riot and Anthropic had with a powered land lease we saw a week or two ago. Can you just walk us through how we should think about that commentary for Phase 1? And if this is a structure we should expect to be replicated across Phase 2 and potentially Phase 3?

Ted Warner (Chief Financial Officer)

Yeah. Hi, Mike. Thanks for the question. Yeah, I mean, the short answer is yes. It seems to be a similar-looking structure. Right, we saw that announcement. A modular build with a cost per megawatt that was half of the low end of a traditional build, and we’re in the same place. We’re seeing a lot of the leading global technology companies like the one we’re working with that are trying this modular approach because speed to compute is becoming the most important thing. With the capital markets where they are, they’re getting more creative and, yeah, we feel that the returns that we’re going to get off of a project like this are great given what’s happening in the credit markets.

And as for Phase 1 versus Phase 2, yeah, we’re still trying to figure out what we’d like Phase 2 to look like. We’re working closely with the client, but I think, as Evan alluded to earlier, yeah, there’s a good chance that Phase 2 looks remarkably similar to Phase 1, but that hasn’t been completely ironed out yet. We’re far more focused, as Charlie said, on just finalizing Phase 1.

Mike Rondon (Analyst)

Got it. And then one more: with Phase 1, can you just clarify, are there any remaining approvals, permits, regulatory issues? And then can you give us a little bit of insight into any Phase 2 approvals or how TCEQ air permitting is progressing?

Ted Warner (Chief Financial Officer)

Yeah, I’ll let Evan answer that.

Charles Nelson (Chief Executive Officer)

Actually, I might chime in here real quick and then Evan. But one thing to kind of state, when our team sort of took over development a few months ago, we really just started knocking down every single outstanding item and really taking all of the risk off the table in terms of the development and constructability of this. That was reflected in the permits that we talked about in the last call as well as securing the power in the manner that we did secure it as well and the quality of that power.

And so—but yeah, I’ll let Evan kind of chime in a little more on detail. Thanks, Charlie. No, a great question. We’re fully formatted. We have been for a while. I mean we included the pictures. We’ve already started site work for phase one. There’s nothing in between us and delivering the project at this point. As far as the question about standard air permits, as I stated in the last call, we still anticipate that’s going to be approved by end of year. It does appear like TCEQ is open for business again. They are accepting new permits.

And so, you know, we did file that permit rather early. I wish I’d have filed maybe a week earlier we would be having this discussion. But we don’t anticipate that’s going to impact our project at all. Sure. So we picked up. Yeah, I mean it was just a. It was one of these little pieces of land that’s contiguous to the property that we have. You know, we’ve done this once before, picked up an extra 50 some acres just to. It essentially creates an ease of utility build out. And so we worked with the city of Odessa on this, which was who we bought the original acreage from to begin with. And so basically it’s some connective tissue. It’s usable and so it just bolsters the position and makes all the execution of getting power to A to B even easier.

OPERATOR

Thank you. Our next question comes from Nick Giles with B. Riley Securities. Your line is open.

Nick Giles (Analyst)

Yeah, thanks operator. Good morning guys. Just was curious, you know you mentioned you’re in advanced negotiations on phase one at this stage. And so what would you say is really still being worked through? Is this more of a technical or design nature? Is it economics? Just curious on anything more you might be able to say on kind of where things stand. Thanks.

Ted Warner (Chief Financial Officer)

Yeah, I think we’ve got a full agreement on what the economics are going to look like. So we’re really excited about that. And, you know, these modular builds are fairly simple from an SLA perspective, so. But yes, you’re right. I mean, there are a few more technical things to work out and, yeah, I mean we feel really good about where we are at the moment.

Nick Giles (Analyst)

Good to hear. Okay, thanks for that, Ted. I guess it sounds like you’ve already made a lot of progress in de-risking the supply chain. I just, I struggled to catch it all. Can you just walk us through kind of what remaining long lead time items still need to be secured for phase one and what kind of if there’s any deposits you might need to make on that and then how are you thinking about, you know, reserving capacity for phase two? Thank you.

Ted Warner (Chief Financial Officer)

Yeah, and maybe I’ll let either Evan or Jose touch on the long lead time items. But what I can say is, you know, the tenant has been, the prospective tenant has been extremely helpful as it relates to, you know, procurement of any long lead time items that we may not have on hand. Leveraging their supply chain has been something that we’ve really wanted to do. But Evan, Jose, I’ll let one of you go.

Jose Reynaldo Rodriguez (Chief Operating Officer)

Yes, Nick. And as we’re working to finalize the design of what it looks like, which, not to put the cart before the horse, we have to finish the lease in order to understand the technical specifications completely. We are talking in parallel to various equipment providers to understand the supply chain, to make reservations. We know the electrical equipment that is going to enable the delivery. We’re working on that to secure that. And there are no blockers for us to be able to execute once our final design is complete.

Evan Pearce (Chief Development Officer)

Yeah, I think it’s important just to note how, you know, the voltages that we operate under, what the power is being delivered under, and, frankly, the scope of the type of modules that are going in, a lot of that is being handled externally that we aren’t exposed to. So a vast majority, because you hear long lead time items, a lot of that’s 345 kV step-down transformers, stuff like that, that’s traditionally taking from transmission-level voltages down into usable voltages.

We are already down in that usable voltage range, so it is a little bit easier and we’re not exposed to the same kind of constraints that you would typically see in that type of execution.

Nick Giles (Analyst)

Great. Okay. No, thanks for that. I appreciate all that color. And then just last one for me. You mentioned some of the new hires. It’s impressive to see you guys add this amount of talent. I guess, given that phase one is already in late stages, phase two a little further down the road. What is the team really working on here and now? You know, are you, are you looking at new sites? What are some of the key criteria in the pipeline? Just any more color on kind of that ongoing work.

Thank you.

Charles Nelson (Chief Executive Officer)

Yeah, I mean, I’ll say this, you know, our ability to take on this development ourselves is largely attributed to the team that we have. When, you know, we talked to the tenant, they looked at our team and said, wow, you’ve got, you know, world-class execution capability here and you’re solely focused on executing this one project. That actually became an attractant that led us into what we’re doing right now, which is self-execution. So, I mean, look, every member of the team is busy doing different aspects, preparing for execution for this project. And so really building the team the way that we did was largely a function that allowed us to get to this self-execution model. And so going forward, look, right now I think it’s best for our shareholders and everyone that we execute on our deal. We get to, you know, we get to RFS and there’s a whole lot that could be done afterwards like everyone else.

I mean, look, we see a ton of projects. We also look at the markets and say, well, what makes sense right now? You know, like there’s, there’s a whole series of evolutions that we could do as a company, you know, once we, you know, once we execute on this phase one properly and even into phase two. And so, yeah, I mean, like, yeah, of course we have, you know, a whole bunch of pipeline. It’s just where do we allocate resources right now? And I think the best thing for ourselves, our shareholders, etc. is to, you know, get this one done finally. And then, you know, evaluate the world after that.

Nick Giles (Analyst)

Makes sense. Okay, well guys, I really appreciate the update and keep up the good work. Exactly.

OPERATOR

Thank you. Our next question comes from Brian Baratheon with Roth Capital Partners. Your line is open.

Brian Baratheon (Analyst)

Thank you, operator. Hey guys, great news on all the progress in the quarter. I have a couple of quick questions. Last week or two weeks ago, Cypher was. Cypher was. You guys were mentioned on Cypher’s earnings call and what they mentioned was that they see monetization value in the Odessa site pointing to like speed of site access and scarce long lead equipment. Can you guys provide any color on like on the source of that claim? And does that have anything to do with you guys and how you’re structured now?

Whether it’s getting equipment delivered to the site or whether it’s like doing a potential JV. My read is that that’s not the case. I mean, you guys have your whole, you built a really strong team and you can do this yourselves. Can you provide any color on that?

Ted Warner (Chief Financial Officer)

Yeah, sure. I mean, I can’t comment as to what they mean from a monetization standpoint there. I can only say what we said in the presentation, which is what we’re looking at right now in our current phase one plan is delivery in September time frame for this first modular deployment on the 207 on our acreage. What that will require is spending a little bit of money to get that power over to our site versus where it’s going to right now, which is theirs.

And that’s simple. And then the existing PPA between them and Vistra has a clause in it where the substation they have right there and all the electrical equipment needs to be bought back by Vistra, or in this case us. What we’ve agreed to in our PPA is to execute this PSA which says we will pay for a new line run from their plant to our acreage and we’ll also take on that obligation to purchase their substation and all the electrical equipment which, like you said, that helps as far as long lead time items go.

Right. Just an existing substation, everything we need is right there. And the mechanism for the pricing there is just a. They’ve already got a baseball appraisal mechanism that’s built into their documentation which I think is publicly filed. So that’s, I mean that would be definitely the one thing that we would be purchasing from them ultimately or purchasing from Vistra. I’m not really sure exactly how that mechanic will work, but that is a part of the transfer of the power from them to us.

Got it. Purchasing all that equipment, which is, you know, we find that to be really convenient.

Brian Baratheon (Analyst)

Thanks, Ted. My next question is, you know, with, you know, with the elections now done and Governor Hinojosa taking office in January, there was a New York Times report that happened a couple days ago where she mentioned we’re looking to stop projects that have already begun construction but still need certain permits. You know what, what I found interesting about that was originally my take was, you know, if you were under construction and a lot of capacity was being delivered and there were large sums of like capital being invested especially to grow these areas.

I thought it was interesting that it was the whole thing on permits. Can you give, and I may have missed this on the call back, I’m sorry, but can you give a little bit more color on, you know, I saw the TCEQ website is now up and running. They’re accepting new permits. Can you give a little bit more color on, you know, why you guys feel like de-risked in achieving that air permit and some color on timing on that?

Charles Nelson (Chief Executive Officer)

Yeah, and I’ll chime in here real quick. Look, you know, the objective here that they’re trying to do is make sure that—she’s been very clear about this—make sure that projects that are being permitted now or filing permits post-election, or ones that are in the batch process, follow a certain set of criteria that take care of the local communities and a whole bunch of social license to operate types of things. Given the fact that we already have the permits, I think we’re insulated from that.

And so the objective isn’t to pull back permits that are already issued. That is not something that they want to do. But furthermore, we look at how we intend to operate from a thesis-wise, and there’s actually a fair bit of alignment between what everyone’s been asking for and what we’ve just been electively doing as a company. It’s built into the ethos of what we do. So, talking about our risks on phase one, I mean, that’s one thing. We’ve kind of already covered that. On phase two, as it relates to the air permits, this is a standard air permit. It’s not like the country or Texas, or anyone, is going to stop allowing air permits to be issued.

I think just as it relates to the specific application to this industry, they just want to see a few things checked off—making sure that the social license to operate aspect of these developments is considered—which, again, has been built into our operating thesis before anyone ever asked for it. So, to the extent that these permits are now kind of dislodged and the processes are moving, they’re going to get issued when they get issued. But I don’t think the intention of the new government whatsoever is to stop these developments. I think it’s just to make sure that communities are taken care of, and we’ve spoken pretty aggressively about making sure that community engagement is a core tenet of what we do. And so, as far as phase two, beyond even additional projects, I think the way that we operate our company is pretty well suited for the new world that everyone found themselves in last Tuesday.

Ted Warner (Chief Financial Officer)

I can say that the LOI that Charlie referenced is with a leading global technology company, is what I would use as the description here. And they are under exclusivity. So our other conversations that we were having with a wide range of high-quality potential tenants, those have all ceased as we are trying to get to the finish line. Absolutely. I mean, just pointing back to the reason why it was so hard for us to begin conversations with a lot of these entities is they were also trying to get a hold of that power once it became available back in July. Right. So they were first our competitors, and then they became our prospective tenants once we were able to secure the power. So, you know, tough to fight against some trillion-dollar companies out there, but we were able to do that, executing that DFA framework that we’ve laid out, where Vistra has—they’re aligned with us.

They’ve got that 5% ownership stake in anything they supply power to and a ROFR on that entire phase three. And that, to them being a utility, is a very valuable thing. So that was how we ended up with it. And then immediately, once that question was settled of who’s getting this power, we were able to have conversations with numerous tenants. And over the last three months, with what’s happening, with the uncertainty in the Batch 0 process, has our power become a more valuable commodity? Absolutely. There was a ton of interest, and we chose to work with the party that we felt was going to give us the best chance for success and a really high-quality lease in the current market.

OPERATOR

Thank you. Our next question comes from Kevin Pimentel with Alliance Global Partners. Your line is open.

Kevin Pimentel (Analyst)

Morning. Thanks for taking my questions. Just one for me. Could you help us bridge the timing between power availability in Q3 ’27 and initial ready for service in Q4 ’27? What needs to happen during that period before the first tenant can begin operations?

Ted Warner (Chief Financial Officer)

I think I’ll let Evan speak to this. I know that the timing that we’re talking about for trying to start lighting up some of this modular compute is September, but I’ll let Evan talk about what we actually have to do between now and then.

Evan Pearce (Chief Development Officer)

Thanks, Ted. I mean, generally, the way I look at it, there’s really two kind of barriers to landing capacity for customers. The first one is getting to the point where you can start construction, and the second is data center commissioning, which requires power. And so we’re clear for construction right now. So the question really is about when is power availability. And so, if you go to Google Earth, you look at the location of where the substation is now and our site, you can see it’s a relatively short run for distribution lines from that substation to our site.

So basically what needs to happen is, once the current PPA owner no longer has the PPA, in the interim is the buildout with Vistra of the distribution infrastructure from their site to our site, which is a pretty simple matter, and then bringing it to our switching station on our site. And due to the nature of how we’re building this site out with the modular solution, it’s not like a standard stick-built in the sense that’s going to take a long time to do. And so really there’s just some final site work preparing the site for delivery of those modules, and then that rather short distribution run from their site to our site, and then our on-site switching station, which will include metal-clad switchgear, and then the delivery of the assets from the customer, and then commissioning.

And that’s kind of it. It’s not super complicated.

Kevin Pimentel (Analyst)

Got it. Thank you.

OPERATOR

Thank you. This concludes the question and answer session. I would now like to turn it back to Charles Nelson for closing remarks.

Charles Nelson (Chief Executive Officer)

Yeah, and look, thanks everyone. And honestly, thanks for the questions. And, you know, just to reiterate, our focus now is squarely on completing this lease and putting the financing and delivery arrangements around it. You know, our non-binding LOI covers phases one and two at TCDC with the same tenant, which is, as Ted mentioned, a leading global technology company. Just to summarize what we’ve been doing, I mean, we’ve contracted this very valuable phase one power, we’ve posted our initial credit support, so we’re safe there. We’ve made really good strides on this leasing since we’ve taken the reins here. We’ve strengthened our balance sheet, we continue to add the technical depth to be able to execute. Look, I believe it’s important to address the evolution of our partnership strategy in these closing remarks.

As this asset’s been developed, we’ve made the election—and again, this is at the request of the tenant—to proceed in executing and delivering this project by ourselves. And there were several factors that played into this decision. But it’s important to note that only until recently, when we control the PPA, were we able to take control of this leasing process ourselves and not rely on other parties. And since then, the contracting phase has significantly accelerated to the place it is today.

And look, we’re only able to do that because of the strength of the team and the position of the power contract. Contract moving away from our potential JV was not a function of contention. We love those folks. But it was merely a decision that controlling our own destiny was deemed the lower-risk path forward by both us and the prospective tenant. And in today’s market, when a tenant sees a team of our caliber who is not being pulled in numerous directions by numerous large-scale projects, they see something rare that points to lower execution risk, which is how we ended up here.

And so, in summary, that was not a decision that was taken lightly, but we believe that it will provide significantly higher value to our shareholders long term. And we believe owning all of the current phase one and whatnot leaves us in a similar capex position. And I think that the outcome of this whole process and the evolution that got us here is really going to produce the best value for all of our shareholders. And with that I’ll just say we appreciate your time, we appreciate your support, and our team is always available if you’d like to follow up. So thank you very much.

OPERATOR

This concludes today’s conference call. Thank you for participating. You may now disconnect.

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