Meet TeraWulf: Exclusive interview with CFO Patrick Fleury

In an exclusive interview with The Fly, TeraWulf’s (WULF) CFO Patrick Fleury talked about the company, the Bitcoin mining space, artificial intelligence, and much more.

CLEAN BITCOIN MINER: TeraWulf develops, owns, and operates fully integrated Bitcoin mining facilities in the U.S., “generating attractive investor returns while providing sustainable benefits for our communities,” says the company. “Tera is a vertically integrated and environmentally clean Bitcoin miner. We’re led by a group of experienced energy entrepreneurs, with a focus on infrastructure. And we own two facilities — one in upstate New York and one in Western Pennsylvania,” TeraWulf’s CFO Patrick Fleury explained in an exclusive interview with The Fly.

CORE FOCUS ON ESG: TeraWulf generates domestically produced Bitcoin powered by 95% zero carbon energy resources with a goal of utilizing 100% zero-carbon energy. “ESG is absolutely core to what we do, and I think there’s a general misunderstanding of Bitcoin. When done the correct way, Bitcoin mining is a major asset to the electrical grid. For example, in our Upstate New York site we’re about 30 miles east of Niagara Falls, and we’re in a region where you have one of the largest hydroelectric facilities in the world. The river doesn’t care what time of day it is or if people are using electricity or not. It runs over the falls 24 hours a day, 365 days a year. With being sited there, we’re in a position to take hydroelectric power when it’s not being used by the grid and convert that sort of stranded energy resource into Bitcoin, which is a global commodity. We are paying transmission and distribution charges just like any consumer of electricity and therefore effectively lowering the cost for other consumers of electricity in New York,” Fleury said.

The executive also noted about “half of the executives in our company are women. And so that traditionally has been a very important part of our company. This group of executives has been together for 20 to 30 years in various capacities. ESG is a core tenement of everything we do in our company, whether it’s from 0 carbon Bitcoin mining or representation in executive roles.”

UNIQUELY POSITIONED: Rosenblatt initiated coverage of the stock with a Buy rating last month, saying TeraWulf is its preferred way to allocate to Bitcoin below spot prices, “particularly among a not so shareholder-friendly” public peer set. With that said, the company’s CFO believes Wall Street has yet to embrace TeraWulf’s full potential. “Bitcoin mining obviously is what we’re doing today, but we’re also positioning the company to take advantage of the power needs for high power computing and AI needs. And uniquely, our insiders and management team and board own about 40% of the equity of the company. That is the highest among any other public Bitcoin mining company out there. So, we are not only unique from an ESG perspective where we’re 95% zero carbon… I think the combination of low-cost production ability alongside the management team owning about 40% of the equity of the company, positions us very competitively going forward,” the CFO points out.

“Our peers also have very large ATM facilities where they issue equity systematically on a on a daily basis. They’re generally 10% to 20% of daily volume. We also have an ATM facility, but we are very strategic about it because we are allergic to dilution. The management team, given our ownership, does not want to dilute at any level. So, we make sure that when we are using that ATM facility, it is very, very accretive and we look at accretion on an enterprise value to EBITDA basis, which is how any traditional commodity company is valued as opposed to the way a lot of companies in this nascent Bitcoin mining industry have been valued in the past — on enterprise value to revenue and enterprise value to capacity. And those valuation metrics make sense when you’re talking about, like, a technology company, but it does not make sense when you’re talking about a commodity company,” the executive adds.

BIGGEST CHALLENGES: In his conversation with the Fly, Fleury highlighted what he sees as the two big challenges to growth in the crypto space, namely high power compute and artificial intelligence. “High power compute and AI companies like Google (GOOGL), Meta (META), Microsoft (MSFT), and Amazon (AMZN) are competing for the same thing, which is access to infrastructure and cheap power. If you own your infrastructure like TeraWulf does, you can grow into that infrastructure. If you don’t have that growth already, you are now competing for new sites with the likes of Google and Microsoft and Amazon and Meta. Bitcoin miners do not have the same cost of capital as those companies. So, the biggest challenge to additional incremental Bitcoin mining growth, particularly in the United States, is we are now competing with companies that have a much lower cost of capital with much larger profit margins and need to grow tremendously.”

AI VALUE: AI seems to be touching every sector and crypto might be among industries impacted longer-term. “I think it can be very helpful. At our core, we are an energy infrastructure company. We have been mining Bitcoin at our sites because that’s been the highest and best use for that power. But I think as we move forward in time, given our insider ownership, we can use our capacity for high power compute and AI; those businesses tend to trade at 20 to 25 times EBITDA multiples. So, I think there are synergies, with Bitcoin mining and AI being sited at the same site, which could provide a lot of benefit back to the grid. We think there’s incrementally more value longer term in AI, not only from a valuation multiple for our shareholders but just benefiting the grid and providing a service back to it so we can optimize the energy infrastructure.”

“Meet the Company” is The Fly’s recurring series of exclusive short interviews with Executive Officers to offer a deeper look inside the company.