Hut 8 has received approval to proceed with a bid to acquire power facilities totaling 310 megawatts (MW) in a move that could see it pivot to a vertically integrated bitcoin mining, hosting and data center operation.
The Canada-based and publicly traded mining operation said in an announcement on Friday that it obtained the green light from the Ontario Superior Court of Justice to initiate a “stalking horse bid” for four natural gas power facilities in Ontario.
A “stalking horse bid” serves as the initial bid on the assets of a bankrupt company, setting the lower end of the purchase price range. The power facilities at the center of this bid are situated in Kapuskasing (40 MW), Kingston (110 MW), Iroquois Falls (120 MW), and North Bay (40 MW).
These power plants are presently owned by Validus Power Corporation, which was formerly a power provider for Hut 8’s facility in North Bay but became embroiled in legal disputes with Hut 8 last year.
In August, Validus was forced into bankruptcy. Simultaneously, Hut 8 entered into a transaction support agreement with Macquarie Equipment Finance, a creditor of Validus, to acquire certain power assets from Validus.
“If our bid to acquire four natural gas facilities in Ontario totaling 310 MW from Validus is successful, we anticipate that the strategic addition of these assets would position Hut 8 as a vertically integrated mining operation, allow us to utilize idle infrastructure and machinery, and provide access to energy pricing certainty,” Hut 8 CEO Jaime Leverton said in the announcement.
The power disputes with Validus since last year had an impact on Hut 8’s self-mining capacity, as the chart below shows. The company’s bitcoin production has been steadily declining, in part also thanks to its competitors outgrowing Hut 8 at a notable pace.
If the bid proves successful, Hut 8 said a new company named BidCo will assume ownership of the Validus assets, with Macquarie holding a 20% minority stake, and Hut 8 taking over the remaining 80%. Hut 8 had $20 million in cash as of June 30 and 9,366 BTC as of the end of September, worth around $318 million at the moment.
The potential access to these power facilities aligns with Hut 8 obtaining approval from Canadian regulators to finalize its merger with USBTC, further expanding its self-mining capacity in North America.
Subject to several conditions, Hut 8 expects the stalking horse bid to be completed before the end of this year.
Kelowna Data Centre image via Hut 8