Fermi Q3 2026 Earnings Call Transcript

Fermi (NASDAQ:FRMI) 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

Fermi announced a strategic shift as the TensorWave lease will not proceed, but secured a new agreement with an investment-grade hyperscaler for 600 megawatts of 2027 power capacity, simplifying its deal structure.

The company emphasized its Powered Land Plus model, which allows hyperscalers to build and operate their own data centers while Fermi provides power, land and campus infrastructure, thereby reducing Fermi’s capital requirements.

Fermi reported ending Q3 with $316 million in cash. Its capital strategy involves using project-level debt and equity while focusing on deals that require less upfront capital from the company.

Full Transcript

OPERATOR

Good morning and welcome to Fermi third quarter 2026 earnings call. At this time, all participants are in a listen-only mode. We will open up the floor for your questions after the presentation. If you wish to join the queue to ask a question at any time, you can press star 1. Should you wish to remove yourself from the queue, press star 2. It is now my pleasure to turn the floor over to your host, Rodrigo Acuna, Director of Investor Relations. The floor is yours.

Rodrigo Acuna (Director of Investor Relations)

Good morning and welcome to Fermi third quarter 2026 earnings call. I’m Rodrigo Acuna, Director of Investor Relations. With me today are Lee McIntyre, our Chief Executive Officer, Rob Masan, our Chief Financial Officer, and Anna Botham, our Chief Commercial Officer. Later in the call, we’ll be joined by Marius Haas, our Chairman of the Board, and Jacob Ortiz, our Chief Operating Officer. Today’s remarks include forward-looking statements. They are subject to risks and uncertainties that could cause actual results to differ materially. Please see the risk factors in our Form 10-K, Forms 10-Q, and other SEC filings. We will also discuss non-GAAP measures. Definitions and related disclosures are in our investor presentation.

After our prepared remarks, we will take your questions. Now I’ll turn the call over to Lee.

Lee A Mcintire (Chief Executive Officer)

Thanks, Rodrigo. Good morning everyone. This is my first earnings call as CEO. I want to use it to tell you where we’re taking Fermi and how we’ll get there. Let me start with the environment we’re operating in for context. In the past couple of months there’s been significant change in the market. Power got more scarce. State by state, moratoriums tightened up access to electrons. And in Texas, ERCOT, for example, froze new large load connections which are powering AI data centers. Land got harder to find. Community angst about the spread of data centers, concerns about water, noise, light and the natural environment have taken many sites off the table.

Permits are harder to come by. Texas, for example, paused new air permits before the election. And then the elections last week added more uncertainty. As a result, the gates to first power got harder to clear. That’s driving demand higher for safe harbor sites where the region benefits from jobs, economic development and long-term investment. That’s bringing investment-grade hyperscalers to our door. We’ve also seen shifts in how AI infrastructure gets financed. The high-yield bond market has tightened. We feel more hyperscalers are moving away from neoclouds toward direct relationships. As this shift is occurring, we’re focusing our commercial work on deals directly with investment-grade hyperscalers.

Against that backdrop, we made two announcements this morning. The TensorWave lease will not move forward. That deal was a complex turnkey lease with a neocloud involving multiple parties and requiring the support of third-party credit. Most importantly, today we’ve reached an exciting agreement with an investment-grade hyperscaler for 600 megawatts of our 2027 power capacity. It’s a simpler deal providing power to a single customer with less to finance.

It’s a stronger deal on every measure that matters to us. It’s nearly three times the capacity. It’s with an investment-grade hyperscaler directly, so it doesn’t depend on anyone else’s credit. The customer is building its own data centers on our project. So Fermi doesn’t carry that construction capital requirement and, importantly, it’s putting capital up front to accelerate construction. These consist of a $200 million prepayment agreement. It provides substantial upfront funding for the 600 megawatt development and an early construction and site development agreement that sets framework to start site preparation. We’re excited about the structure of this deal and it comes with little or no dilution. This is our strategy in practice. We invested early to getting the site ready. That lets customers build faster, brings their capital in earlier and turns their power and infrastructure advantages into long-term revenue opportunities.

We continue to work towards a definitive long-term lease and the customer’s identity remains confidential. Our advantage isn’t just that we have power, it’s that we’ve done the work to help customers turn access to power into operating data centers faster. That work extends to the ground we’re building on. Our campus is on land leased from Texas Tech University System. In this market, that partnership is even more valuable. Earlier this week, Texas Tech Chancellor Brandon Creighton reaffirmed that the university, quote, remains firmly committed to the success of Project Matador.

When community concerns are taking sites off the table, that kind of institutional backing is part of what we believe makes our site a safe harbor. We have the power, the land and the permits in hand as many of our competitors face strong headwinds. We’ve invested more than $1.6 billion in the site. We’ve done the long lead work ahead of lease: construction, engineering, design, site preparation and moving equipment to site, which reduces execution risk for our customers and our lenders. On permits, we have air permits for 6 gigawatts in hand. We have a comprehensive water strategy built around conservation.

We’ve designed the project to minimize water use by maximizing dry and hybrid closed-loop systems. When we’re running at capacity we expect to use about 80% less water than traditional methods. For fuel, Energy Transfer has committed up to 220,000 MMBtu of natural gas per day. We’ve installed 4.6 miles of on-site pipeline rated at 450 million cubic feet per day. That’s plenty for 2 gigawatts. On power, we’re bringing our own behind-the-meter, on our own grid. We have more than 2 gigawatts of generation equipment secured. Many in the Panhandle community are supportive of this project. Lastly, where our competitors are struggling to source equipment, we already have turbines on site.

Those advantages are hard for others to replicate. We have a robust pipeline of customers who see this. Our disciplined capital management puts us in strong position to evolve Fermi from pre-revenue, pre-lease to our next phase. Now I’ll turn the call over to Anna who will walk you through how we’re building our customer portfolio.

Anna Botham (Chief Commercial Officer)

Thanks, Lee. I’m really excited about the commercial progress we’re making at Fermi, and I want to spend a few minutes talking about why this hyperscaler relationship is so significant and what we’re seeing across our broader customer pipeline. Power has become one of the defining constraints on AI growth. And it’s no longer just about how much power you can deliver. It’s about how quickly, how reliably, and whether you have the infrastructure in place to support development at scale.

One thing has become increasingly clear in our conversations with the world’s largest technology companies. Customers are no longer waiting for power to come to them. They’re building around where power is available. The 600 megawatt commitment Lee just described is a great example of this shift. We’ve spent months working closely with this customer’s commercial and technical teams, listening to their requirements, understanding their development timelines, and aligning our plans around what it will take to bring capacity online as quickly as possible.

And what’s particularly exciting is how we’ve been able to align around what each side does best. These are sophisticated customers. They have their own engineering standards, building designs, construction teams and capital. They don’t necessarily need us to build their data centers for them. What they need is reliable power, development-ready land, and a partner who can help them move faster. That’s precisely what our Powered Land Plus offering is designed to provide.

Fermi brings the power, the land and the supporting campus infrastructure. Our customers can bring their own designs and construction capabilities, allowing us to move forward together faster without Fermi having to finance and deliver the entire data center. And in this case, we’ve gone a step further. We’ve already advanced engineering and design work with our partners and we secured critical long lead materials ahead of the customer’s final lease. Structural steel is a great example. Rather than having to start a new procurement cycle, this customer can leverage this deal we’ve already secured to accelerate its construction schedule. That’s the value of the infrastructure work we’ve done in advance and why being ready matters so much in this market.

The customer is now moving forward with substantial financial commitments and construction preparations ahead of finalizing the long-term lease. To me, that speaks to both the urgency of demand and the strength of the partnership we’ve built. We’re targeting initial power availability in late Q2 or early Q3 of 2027 and the customer is aligning its development plans with that schedule. For Fermi, this creates the opportunity to bring our power capacity into revenue sooner while deploying less capital into customer-owned data center construction.

And importantly, we believe this approach can be replicated. Our pipeline is strong, with active discussions across multiple investment-grade hyperscalers. If the opportunities we’re pursuing today convert into definitive agreements, they could absorb our planned 2.2 gigawatts of capacity. And our broader pipeline extends several gigawatts beyond that. We’re also seeing customers think well beyond their initial deployment. They’re asking about future expansion rights and how they can grow with us as additional power becomes available.

That’s central to how we envision Project Matador developing. Our strategy is to anchor the campus with four to five investment-grade hyperscalers, each able to establish an initial presence and expand over time. That creates the potential for a diversified long-term customer portfolio, greater visibility into demand and a more disciplined approach to planning and financing future infrastructure. Our focus now is execution, converting our pipeline into financial commitments and long-term agreements, aligning customer construction schedules with our 2027 and 2028 power ramp and bringing capacity into revenue as quickly and responsibly as possible. Ultimately, we’re not simply selling megawatts. We’re building the infrastructure and partnerships that enable some of the world’s largest technology companies to accelerate their ambition. We’ve established the foundation.

Now we’re seeing customers begin to build on it. With that, I’ll turn it over to Rob to explain how our three commercial offerings and broader capital strategy support that growth.

Robert L. Masson (Chief Financial Officer)

Thank you, Anna, and good morning. Today I will cover our third quarter results, our liquidity, our capital strategy, and our covenants. Before I do that, I want to build on Anna’s comments and talk about the multiple options Fermi has to create differentiating value. This quarter we shared our business strategy that aligns our pricing, cost, and capital requirements for the long term. You can see this strategy in action with the recent news, which is tightly aligned with today’s market, the capital raising environment, and what our customers need.

And it’s the right approach for this early stage of our business. Fermi creates value two ways under one triple-net lease. We sell private, behind-the-meter power and we lease data center real estate on our campus. Each has a fixed charge and a variable charge. The fixed charges—capacity charge for power and base rent for real estate—recover our capital and costs and earn our return. Both escalate and are take-or-pay over 15- to 20-year terms. The variable charges for energy and common area maintenance pass fuel, operating costs, insurance, and taxes through to customers.

The power is the same in every deal. What changes is how much of the real estate we build. Fermi offers customers three options. Our focus is Powered Land Plus because it is what the hyperscalers we’re talking to are asking for. Under the Powered Land Plus model, the customer gets a development-ready parcel with power, water, fiber, security, and shared campus infrastructure in place. The customer builds and operates the data center. Hyperscalers have their own design and build partners. Powered Land Plus is the fastest to deliver. This model plays to who we are.

A private power company, dedicated power on our campus sets us apart from others in a crowded data center space. Powered Land Plus needs the least capital from Fermi. It puts capital where our advantage is—power, fuel, and permits. And it leaves the construction risk with the customer, greatly reducing our capital requirements. To help you frame each model, our investor presentation shows economics from recent market deals on page 11. These are market benchmarks, not Fermi deal terms. They are based on market rates for 45 deals over a two-year period. They are not necessarily indicative of where the market is today and only a small portion are behind-the-meter deals. What’s important is the relative value. Even at these historical rates, the data shows Powered Land Plus has cost roughly $3.9 to $5.1 million per megawatt of total power capacity to build at equivalent market rates.

It earned about $55 to $69 per kilowatt-month in fixed charges, including base rent and capacity charge. The second model is Powered Shell. It includes everything in Powered Land Plus. We also deliver the building and its core infrastructure. The customer fits it out and capital and revenue sit in the middle. In recent deals, Powered Shell has cost about $5.1 to $6.6 million per megawatt of total power capacity to build at historic market rates. It earned about $64 to $80 per kilowatt-month in fixed charges, including base rent and capacity charge. Powered Shell brings in more revenue per megawatt than the Powered Land Plus, but it needs more Fermi capital and we take on the added construction and delivery risk of the building.

The third model is Turnkey. In the Turnkey model, we develop, build, and deliver the complete facility. It earns the most contracted revenue per megawatt. But in recent market deals, Turnkey has taken about three times the capital of Powered Land Plus for about 2.4 times the revenue. Each deal is negotiated around what the customer needs, so terms will differ from deal to deal. For our 2027 and 2028 capacity, Fermi and our potential customers are focused on moving quickly, committing capital early, and building their own facilities. That’s Powered Land Plus, and it keeps our capital needs down. That enables us to sell our power as it comes online without carrying all the construction capital ourselves. Our customers get the power they want in the timeframe they desire, and Fermi is able to generate revenue matched with the power delivery.

Now a quick review of our third quarter results. I’ll focus on cash and liquidity this morning as the details of the quarter are available in the release. We ended the quarter with about $316 million of cash, cash equivalents, and restricted cash, including $286 million of unrestricted cash. Property, plant, and equipment grew by about $120 million in the quarter to about $1.67 billion at quarter end. And following our $430 million convertible senior notes offering in July, we had $958 million of debt, net of discounts and issuance costs.

On liquidity, we’re being disciplined in our capital deployment, more closely matching outflows to inflows. Our operating cash outflow was $54.5 million in Q3 and our capex was $133 million, down from $185 million in Q2 and partially supported by our equipment facilities. Going forward, we have $126 million of equipment commitments, $112 million of which will be funded using our facilities over the remainder of 2026, 2027, and into 2028. As we transition to vertical construction for lease requirements, so too our funding is transitioning from Fermi corporate cash to customer prepayments and project-level debt and equity.

So our budgets and spending are aligned with the project resources, easing the burden on corporate cash burn. Now, our capital strategy across the campus. Our capital strategy aims to reduce the Fermi equity each megawatt needs and reduce corporate capital exposure as we add capacity. We’ll do that: use project-level debt and equity while limiting recourse to our corporate balance sheet; prioritize Powered Land Plus deals for our 2027 capacity and planned 2028 development; bring customer capital in earlier through development contributions, reservation fees, prepayments, and mobilization payments like the ones we highlighted earlier.

We’ll report on financing and capital commitments as we hit each milestone. Briefly on covenants. We made good progress over the past couple months. First, the turbine warehouse facility with MUFG. In October, we supported the transfer of the facility to a new syndicate of lenders. The amendment has four significant benefits for Fermi. It removed the November 10 lease deadline. It removed the risk of our lenders marketing the turbines for sale after November 10. It kept our minimum principal payment at 5% of the loan balance rather than stepping up to 10%.

Based on our estimates, that eliminates potential required principal payments of more than $55 million over the next three quarters—cash we keep in the business. Lastly, it lets us move the equipment to the site, reducing extra storage, transport, and insurance costs of holding it elsewhere. With the move mostly complete, we are now able to immediately start vertical construction on the turbines. In return, we paid the lenders about $25 million in amendment fees.

With that, I’ll turn it back to Lee.

Lee A Mcintire (Chief Executive Officer)

What we’ve built puts us in an advantaged position—permits, power equipment on site, fuel, water, and the site work, along with an impressive list of proven contractors. Demand for what we offer is strong. We have five priorities in the near future. Finalize a definitive lease agreement with our hyperscaler that we had talked about this morning. Convert our other customers in our pipeline into tenants. Protect liquidity and match spending to commitments.

Advance financing partners and bring in customer capital. Keep the site ready and work safely to deliver first power next year. I want to thank our employees and contractors. They’re the ones actually putting turbines on site, piping in the ground, and getting our permits in hand. I want to thank Texas Tech University and the Amarillo community. I want to thank our investors. We are 100% committed to converting our advantages into cash flow and returns for you.

For Q&A, Rob, Anna, and I are now joined by our chairman, Marius Haas, and our Chief Operating Officer, Jacobo Ortiz. And we’ll take any of your questions.

OPERATOR

Thank you. The floor is now open for questions. If you wish to join the queue to ask a question at this time, please press star one. If listening on speakerphone today, please pick up your handset while asking your question to provide optimal sound quality. Once again, please press star one on your phone at this time to join the queue to ask a question. First question from Paul Golding with Macquarie. Please go ahead.

Paul Golding (Analyst)

Thanks so much for taking my question and congrats on the new hyperscale relationship. I wanted to ask around sort of pending items for executing the definitive lease here. What are the key negotiating points and how you’re thinking about incorporating maybe other aspects of your forward purchasing of long lead time items into building out that relationship further beyond this initial 600 megawatts? Thank you.

Anna Botham (Chief Commercial Officer)

Hi, this is Anna. I’m happy to take that question. So, in terms of where we’re at with the lease negotiations, we’re very, very far along. As is indicated by the announcements we had this morning, we are actively pursuing this schedule and what that means is we have to start mobilizing on our site in order for us to hit the timeline for power and for the customer to hit their goals around getting their data centers stood up. So what that tells you is that we are, again, very far along and both committed to working through the final items for the lease.

As soon as we get that done, we will of course announce that. We’re also actively working on not just the 600-megawatt opportunity, but additional opportunities for capacity in 2028. And so the goal is to not just do the initial phase, but to have a second phase following that. And again, we’ll announce those definitive agreements as soon as they are signed and we are able to give you more details.

Paul Golding (Analyst)

Thanks for that, Anna. And maybe as a quick follow-up, I was just looking to get some additional color on any permitting that the hyperscaler may need for the structures that they would be looking to build. Understood that you have the TSEC air quality permit for up to the 6 gigawatts, but wondering if there’s any incremental permitting that would be pending in this arrangement. Thank you.

Anna Botham (Chief Commercial Officer)

Yes, we’ve been working very closely with them on all permitting requirements. One of our advantages is that we have done the heavy lifting on the permitting side and so our customers are able to take advantage of that and lean on the work that we’ve done. And it’s actually been one of the things that has really accelerated the conversations is because we had that permitting in the same way that we already have this deal, it really just allows us to move quickly and in lockstep with the customer.

Paul Golding (Analyst)

Great, thanks.

OPERATOR

Thank you. Next question comes from Nick Amekuchi with Evercore ISI. Please go ahead.

Nick Amekuchi (Analyst)

Hey, good morning, squad. I just wanted to touch upon the $200 million prepayment, and I think Rob, you had alluded to—and Anna just alluded to it as well—just getting vertical with construction on the site. I mean, is it safe to say that the Texas Tech 99-year lease is locked in then? Because we were under the assumption they needed an NTP with the permanent lease agreement.

Anna Botham (Chief Commercial Officer)

This is Anna again. So one of the things that Lee highlighted earlier was just the strength of our relationship with Texas Tech. They have been actively working with us to ensure that we will hit all covenants associated with that lease. And they’ve been incredible partners to us in that regard. The hyperscaler customer has also been an incredible partner in terms of working with us and partnering with TTU. So it has been a three-way partnership to work together to ensure that all the requirements for TTU and that covenant are hit.

And we fully anticipate being able to do that. Yes. So it helps us expedite things tremendously. And what we’ve been doing with the customer is really working through when can they deliver their data centers and when can we have our power available to map to that. So what we determined together was what would be the amount of capital we would need ahead of getting that definitive lease done and the project financing done to ensure we could hit that schedule together. So that’s where that sort of 200 million came from, was us working together to determine that amount.

What that allows us to do is our goal is to start mobilizing on site by December 1st. And so with this payment in hand we’ll be able to go ahead and start doing that.

OPERATOR

Thank you. Next question from John Hudelick with UBS. Please go ahead.

John Hudelick (Analyst)

Great, thank you. Just a couple of follow-ups, maybe for Anna. Just to clarify, Anna, given the situation in Texas and permits required, the potential tenant can begin construction immediately, or is there anything else we’re sort of waiting for from a permitting standpoint for them to begin construction? And then, I guess, based on your guys’ outlook, when do you expect that the tenant would begin sort of off-taking power? And any other color you can provide in terms of, you know, you had the 200 megawatts of grid power—can you talk a little bit about your plans for standing up the assets that you have on site?

You laid a lot of it out on your slides, but just any color on what you would expect to deliver at those dates to the tenant.

Anna Botham (Chief Commercial Officer)

Absolutely. This is Anna again. I’ll take the first part of your question on permitting. Just to be clear, what we have on our site is all of the permitting so far that is required for a customer to be able to start construction and take power. We have been able to work with the customer to ensure that all of the requirements that they have, from environmental to air permitting to local permitting, that all of that is done. And we’ve done that together.

In terms of the second question, in terms of offtake and the timeline, as I mentioned, right now, the way that we have it all outlined is our target is to hit the end of Q2, early Q3 for their first building to be available. And then we’ll continue to deliver buildings, up to eight buildings, as they become available. Our power ramp will be ready for them. And the goal is this would be for 2027.

John Hudelick (Analyst)

Got it. Thank you.

OPERATOR

Thank you. Next question comes from Sky Landon with Rothschild. Please go ahead.

Sky Landon (Analyst)

Hi. Thanks for taking my questions. Firstly, on the new deal, I’m just wondering what you can say in regard to potential lease durations and renewal, and how long this kind of lease would be. And then secondly, just maybe stepping back a little from this deal and thinking about the value of the underlying assets that you already have, namely the gas turbines. We’ve seen a bunch of headlines on the value of turbines and engines, such as the Anthropic news recently. I’m just wondering if you would be able or willing to comment on if you’d had any approaches for your generation assets and what you potentially think that the Fermi fleet could fetch on the secondary market at the moment.

Lee A Mcintire (Chief Executive Officer)

This is Lee Mcintire. Yeah, if you talk about our stock, our market cap, it’s pretty low. If you look at what we have just for the turbines and the ancillary equipment just to support the turbines, you know, it’s probably worth up to close to $4 billion. That doesn’t even take into account the value of the permits—6 gigawatts of permits. We have the site, which is, I think, very valuable, maybe invaluable. The infrastructure we put in—we put in $1.6 billion worth of infrastructure—doesn’t even include the value of that infrastructure.

So you just take the equipment itself, it’s worth about $4 billion. So replacement value alone is certainly worth looking at.

Anna Botham (Chief Commercial Officer)

Yeah, I can take the first part of your question—you asked about lease duration. What we target in all of our deals is we require 15 to 20 years. This is a long-term commitment and part of why we have to work so closely and why we take the time to ensure that we get these deals right. And the other thing that we require is triple-net. So we target triple-net deals, 15 to 20 years of duration. That ensures that we have what we need in terms of being able to finance and have a long-term commitment from the customer.

Sky Landon (Analyst)

Great, thanks guys.

OPERATOR

Thank you. Next question comes from Steven Giangaro with Stifel. Please go ahead.

Steven Giangaro (Analyst)

Good morning. Thanks for taking the questions. I think two for me. Can you talk a bit about, for the contract you announced today, the CapEx requirements on Fermi versus—well, basically on you—versus what the clients will ultimately pay. That’s probably less significant, but what CapEx outlays you need to execute this from where you stand.

Robert L. Masson (Chief Financial Officer)

Yeah, happy to take that, Stephen. It’s Robert Masson. So I think in our deck, in our strategy, we gave ranges and numbers. If you think about Powered Land Plus, which is where this is, the market range is anywhere from $3.9 to $5.1 million per megawatt, and we’ll be within that range. If you think about the overall deal, that’s total cost. You have to realize that we’re not starting from zero. We’ve invested $1.67 billion inside of the project already.

And then what we’ve also talked about is the prepayment now and contemplated further payment. So what we’re doing is being very disciplined with our capital. As we mentioned early on a number of quarters ago, we’re matching our outflows to inflows, and that’s the transition we’re in here with these projects. So our firm commitments are modest outside, and everything’s going on the project side.

Steven Giangaro (Analyst)

Okay. Okay, thanks. And would you—and we have—some of the goalposts have moved a bit, but we’re trying to kind of zero in on what kind of cash payback or unlevered returns do you think are sufficient that you kind of require to push forward with contracts?

Robert L. Masson (Chief Financial Officer)

I think we have indicative rates. What I’d say is, if you look at Slide 11 in our deck, these were 45 market deals. Again, they’re not representative of Fermi, but they’re 45 market deals, and those are from 2024 to 2025. So if you think about that as a baseline and then what makes Fermi unique—we have a very large campus. Very few of these were behind-the-meter deals. We are a behind-the-meter, at-scale opportunity. So we really see that we’re able to have a premium in the market.

And you’ve seen prices move since these deals were announced. So if you think about some of the metrics we put down here that are general benchmarks, you can kind of start to see the math and think about what would be more appropriate for us on a higher end.

Steven Giangaro (Analyst)

Great. I appreciate the color. Thank you.

OPERATOR

Thank you. Next question from Adam Fox, Wembley with Ocean Wall, please go ahead.

Adam Fox (Analyst at Ocean Wall)

Thanks very much. I had two, please. Can I ask you to clarify the precise timing of the 200 million prepayment? Is that a bullet payment or a phased profile? And then secondly, you made reference to the pipeline beyond the 600 megawatts out to 2.2 gigawatts. Is there anything more you can say about the makeup of that pipeline and the timeframes that you’re expecting to work on to those deals? Thanks.

Anna Botham (Chief Commercial Officer)

Yeah, this is Anna. So in terms of the prepayment, what I can share is that the agreement dictates that we need to receive the wire in full for the 200 million by November 13th. And again, our goal is to mobilize by December 1st, and the customer is aligned with that. In terms of your second question on pipeline, as Rob and I and Lee outlined today, our pipeline is really focused on our strategy. And our strategy is working with direct hyperscalers who can self-perform, meaning they can build their own data centers and they can do that at the speed at which we can stand up power. The reason we’re focused on that is it allows us to get what we think are the best sort of return profiles, as Rob described. But it also ensures that we’re getting customers who fit our model and who are able to, what we call, land and expand.

So we’re focused on who are the handful—four to five—hyperscalers that can come to our site, get in, and start working with us, but over time expand their footprint on our site. That’s how we think about our pipeline and how we’ve modeled it out. And again, if we convert our existing pipeline, we will have leases that total that 2.2 gigawatts of capacity. We have clear line of sight into that. The demand is extraordinary for us, and this is why we have the opportunity to really hand-pick who are the customers that really fit our timeline and our model.

And that’s our focus right now.

OPERATOR

Thank you. Next question from Vikram Malhotra with Mizuho. Please go ahead.

Vikram Malhotra (Analyst)

Morning. Thanks so much. Just a couple of clarifications on your comments, I guess. Just first of all, I know you said the Tensorwave deal is not moving forward. Did you terminate that? Did they terminate it? What drove it? Because you put out a whole framework and you had agreed on a bunch of things. So I’m just wondering what led to this termination?

Marius Haas (Chairman of the Board)

Yes, Vikram, thank you very much. This is Marius Haas, love to answer your question—great question. As you can imagine, we won’t be providing any specific details as to specific negotiations between parties, but rest assured, as you know, every single entity in this macro market environment is reassessing every single one of their projects based on their priorities and based on their concept and understanding of when, what can get delivered with what level of complexity.

And if I had to make a choice today—do I like to have a complex four-party deal or a direct large hyperscaler deal? I’d make that choice all day long, every day of the week. We’re ecstatic with the relationship with this party. They’ve spent an enormous amount of time with us on our site. We understand them very well; they understand us. What we haven’t mentioned yet, but it was mentioned in the release, is that there is an incremental $90 million coming on top of the $200 million for the steel that is negotiations to be finalized here in the coming days. And to Anna’s point, the speed at which they have demonstrated they can operate is nothing but impressive. And we’re looking to deliver a significant volume of power capacity in Q2 with a fast ramp to 600 megawatts next year, which is faster ramp, faster access to capital than we had in the previous deal.

Vikram Malhotra (Analyst)

Okay, thanks for that. And then, just—you mentioned the—I wanted to clarify, I think you said November 13th is when you expect to receive the wire for that 200 million. Is that an expectation? And more broadly, do you mind giving us a rough timeline? When do you anticipate signing a definitive lease with this hyperscaler?

Anna Botham (Chief Commercial Officer)

Yes, this is Anna. That is correct. We said the terms dictate that a wire is due November 13th. We have no question in our mind about that in terms of the timeline for the lease. What we can share is that we are very far along. Everything that we’ve talked about today should really dictate and show that this deal is moving forward. To use the customer’s words, they’re willing to take the risk to come on our site and start mobilizing to hit their timeline ahead of that definitive agreement because of all the agreements that we have in place and all the work that we’ve done together to partner.

So our goal is to really serve this customer, hit their timeline, and ensure that they have the capacity that they need to achieve their ambitions into next year.

Vikram Malhotra (Analyst)

Okay, great. And then just lastly, would we be in the ballpark if we were to use sort of a high single-digit, low double-digit yield on cost, if that’s the way this is negotiated, to just gauge sort of revenue in our models? And then I think you mentioned we should not use the… I mean, you’ve given some CapEx numbers, but you’ve also said you’ve spent a fair amount of money. Do you mind just giving us, for this 600 megawatts if this goes through, roughly what’s the incremental spend from Fermi’s perspective?

Thank you.

Robert L. Masson (Chief Financial Officer)

Hi Vikram, it’s Rob Masson again. So yeah, let me point you to a couple. On slide 13 you can see the Powered Land Plus and the benefit. Now, we don’t give specific numbers, but it’s trying to get at your yield-on-cost question. If you look at that, you can see that the Powered Land Plus is the highest return, and that’s really because of the power provided and the incremental capital needed to do that. On the other models it’s a little less. But if you look at that slide, that sort of modeling, as I said before, referencing slide 11, those are market comps, but not very good market comps from ’24, ’25.

There are no behind-the-meter deals. So you can think of us as having a higher ability to get rent payments and so forth because of the value of our property. Anna talked about the ability to land and expand for the tenant over time—it is really significant. It aligns well with us and aligns well with them. If I go to your other part of the question, which is the capital employed, I think once the deal is finalized, we’ll come out with the specific deal amounts. But if you think about it, we’ve invested across the campus to develop—certainly a lot of funding in our turbine assets—which will be standing up to support 600 megawatts. So I think you’ll be able to kind of triangulate into that. And as I said, once we have the deal finalized and have the terms, we’ll come out with more specifics on the deal itself and what it means.

Vikram Malhotra (Analyst)

Thank you.

OPERATOR

Thank you, ladies and gentlemen. That concludes our question and answer session and our conference call for today. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

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