HUTHut 8NeutralHut 8

6d ago on

Assessing Data Center Risk After a Texas Surprise While the markets were pricing in a Democratic takeover of both the House and the Senate to some extent, we believe the magnitude of the win was unexpected. Most notably, a new Democratic Governor in Texas was not our base case, we think this introduces new questions and greater uncertainty for many PSPs operating in that region. We believe states with available power and comparatively lower near-term political risk, such as North Dakota, Louisiana and Kentucky, could stand to benefit from a potential moratorium on Texas data centers. All Eyes on Texas: Texas holds ~30% of data center capacity currently under construction nationally, and Governor-elect Hinojosa has floated a broad moratorium on new sites until new legislation can be put in place. With the scope, mechanism and timeline all undefined, we expect greater uncertainty to continue to drive a risk-off reaction to many Texas based operators. Governor Abbott currently has two months left in office and retains the ability to push project approvals through before handoff, a dynamic that could favor operators who are already energized or sit at the front of ERCOT's interconnection queue. Key Questions the market is Asking: Scope and mechanism of a moratorium: Would it cover only new applications or also projects under construction or with an interconnect agreement in hand? PUCT Control: With two seats expiring in September 2027, could Hinojosa's appointments change the trajectory of ERCOT into 2028? Fate of the ERCOT Process: Will ERCOT's interconnection process continue as planned? Energization dates: Is a reasonable base case that the mega projects with energization dates in proceed as planned? Grandfathering of executed agreements: For sites planned in 2H27 and beyond, is a signed PPA or interconnection agreement protected from retroactive review or do those publicly committed project timelines still hold if tenants are already secured (such as HUT's Beacon Point Phase 2 project with a signed tenant)? Sales-tax repeal bill: With the bill already advancing in the Senate under GOP control, will the trajectory change under a Democratic governor?

HUTHut 8BullishHut 8

6d ago on

Beacon Point lease extended to 17 years; Dec 17 audit and permits clear Phase 2 financing

$HUT actually sounds solid - Amended Beacon Point Phase two lease to extend term from 15 to 17 years, adding two years of contracted revenue for lenders to underwrite, which offset potentially higher financing costs as they look to finance phase 2's 352MWs (amendment only to phase 2) - Do not believe that election outcome changes the outlook for Beacon Point, which base load designation still subjected to Governor Abbotts audits - Focused on Dec 17th timeline when expect TCU and any permits in regards to the diesel generators are secured - Expect Audit results Dec 10th and then finalized Dec 17th (removes impediments for financing Beacon Point Phase 2) - Less than 5% of front of the meter greenfield pipeline is in ERCOT, most in MISO, PJM and SERC (first time to disclose pipeline)