HIVE Digital Technologies Ltd. (HIVE) announces that, further to its news release of July 22, 2024, it has entered into definitive agreements (the "Agreements") for the development of a 100 megawatt ("MW") digital asset mining operation in Paraguay. The Agreements are composed of: (i) a share purchase agreement (the "SPA") among Paraguay Digital Ltd. ("HIVE Paraguay"), a wholly-owned subsidiary of the Company, and the owners of W3X SA ("W3X" or the "Target"); and (ii) a construction agreement (the "Construction Agreement") among the newly acquired Company, W3X SA ("W3X"), and an experienced local contractor (or the "Contractor") (all amounts in US dollars, unless otherwise indicated).
Aydin Kilic, President and CEO of HIVE, stated: "We are proud to announce the acquisition of a 100 MW PPA in Paraguay, utilizing green and clean energy sourced from the Itaipu hydroelectric dam. Our team is hard at work to design and commence building an additional 6.5 Exahash per second (EH/s) Bitcoin mining infrastructure, increasing our global EH/s to 12.1 EH/s." However, we have capped our investment at 100 MW after turning down an additional 150 MW due to unexpected fiscal policy changes. Like many other public miners, we will explore other countries that offer stable capital for key electrical infrastructure, data centers for the global digital economy, U.S. currency income, and transparent fiscal agreements.
Frank Holmes, Executive Chairman of HIVE, stated: "Stable fiscal policies are crucial in attracting and maintaining continued foreign direct investment from public companies and U.S. institutional investors. We will continue to advocate for fair treatment for the data center and Bitcoin mining industries, as we have been doing across Canada, the United States, and Sweden. Data centers in Paraguay act as a currency hedge by bringing the government-owned utility millions of stable U.S. dollar revenue monthly. When they are public companies and institutional funds, they have a multifaceted, long-term vision for both their shareholders and to contribute to regional growth and development, providing meaningful employment opportunities, governance, transparency, and fostering education and needed data center skill development for the global digital economy."
Strategic Investment Plans for Paraguay
HIVE clarifies its strategic investment plans for Paraguay in response to the recent proposal to impose a discriminatory 14% energy tariff increase on Bitcoin data centers.
Mr. Holmes continued, "While we are excited about the opportunities in Paraguay, the proposed energy tariff hike creates uncertainties that impact our long-term investment decisions. We have communicated our concerns with the government and look forward to ongoing discussions to address these challenges. Stable costs and reliable agreement durations are vital to attract foreign public funds. We hope the Government will address these policies to ensure continued investment."
After constructive meetings with key Paraguayan officials in May, HIVE initially planned larger foreign direct investments (FDI), including acquiring land and negotiating PPAs for two potential projects of 100 MW each and another for 50 MW. This investment was anticipated to exceed $250 million, reflecting HIVE's confidence in Paraguay's vision and leadership. However, the proposed 14% energy tariff increase, combined with short-term contract durations and a lack of clarity on energy pricing, has led to a reduction in our investment and a delay in our HPC data center strategy with our suite of Nvidia GPU chips needed to participate in the AI boom.
A 100 MW project needs to attract substantial Foreign Direct Investment into Paraguay and provide essential capital to convert high-voltage electricity into usable power for manufacturing and households. Electricity payments from HIVE would provide a stable U.S. dollar benefit exceeding $100 million over three years, offering reliable monthly income in addition to assisting in building out the electricity infrastructure. This provides a synthetic U.S. dollar hedge that banks couldn't match. Further, the cost of the required electrical infrastructure for stepping down from high voltage power for industrial and residential use is estimated to be around $16 million creating local jobs. Today, our local contractor said we will soon be mobilizing around 80 construction workers for the initial work.
The Paraguayan guaraní has depreciated approximately 36% against the U.S. dollar over the past five years and about 16% in the past year, supporting the importance of stable foreign investments and U.S. Dollar income for Paraguay's economic stability and growth.
Mr. Holmes highlighted as a global money manager: "Research supports the fact that increased electrical infrastructure drives faster economic growth. Studies by the World Bank and the IEA emphasize that investments in electricity infrastructure are crucial for economic development, enhancing productivity, industrial growth, and quality of life."
HIVE is not alone in its cautious approach. Other public Bitcoin mining companies gathered at the largest Bitcoin conference last week in Nashville and said they are similarly reassessing their investment plans in Paraguay due to the proposed tariff increase and contract constraints. This collective response at the conference in Nashville, where former President Trump and Robert F. Kennedy Jr. both endorsed the importance of Bitcoin and Bitcoin mining in their political campaign for the US Presidential election this year, only illustrates the need for stable government fiscal policies to attract and sustain crucial foreign capital investments from public mining companies and institutional funds.
HIVE's approach, based on a transparent 'Return on Invested Capital' (ROIC) model, supports sustainable investment and community engagement, as evidenced by our successful operations in Sweden and Canada. We value the opportunity to contribute to Paraguay's economic growth and remain committed to fostering a conducive environment for business and investment.
