HIVE Digital Technologies Ltd. (HIVE) announces that, further to its press release dated 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 comprised of: (i) a share purchase agreement (the “SPA“) between Paraguay Digital Ltd. (“HIVE Paraguay“), a wholly owned subsidiary of the Company, and the owners of W3X SA (“W3X” or the “Aim“); and (ii) a construction contract (the “Construction contract“) between the newly acquired company, W3X SA (“W3X“), and an experienced local contractor (or the “Contractor“) (All amounts in US dollars unless otherwise stated.).
Aydin Kilic, President and CEO of HIVE, stated: “We are proud to announce the acquisition of a 100 MW PPA in Paraguay, utilizing clean, green energy from the Itaipú hydroelectric dam. Our team is hard at work designing and beginning construction of additional 6.5 exahash per second (EH/s) Bitcoin mining infrastructure, which will increase our overall capacity from EH/s to 12.1 EH/s.” However, we have limited our investment to 100 MW after declining an additional 150 MW due to unexpected changes in tax policy. 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, US currency revenue, and transparent tax arrangements.”
Frank Holmes, CEO of HIVE, stated: “Stable tax policies are crucial to attract and maintain continued foreign direct investment from US public companies and institutional investors. We will continue to advocate for fair treatment for the data center and Bitcoin mining industries, as we have been doing in Canada, the United States, and Sweden. Data centers in Paraguay act as a currency hedge by generating millions of US dollars monthly in stable revenue for the state-owned utility. When they are public companies and institutional funds, they have a multifaceted and long-term vision for both their shareholders and to contribute to regional growth and development, providing significant employment opportunities, governance, transparency, and fostering education and skills development necessary for data centers in 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 increase in energy tariffs creates uncertainties that impact our long-term investment decisions. We have communicated our concerns to the government and look forward to continuing discussions to address these challenges. Stable costs and reliable duration of agreements are vital to attracting foreign public funding. We look forward to the government addressing these policies to ensure continued investment.”
Following constructive meetings with key Paraguayan officials in May, HIVE initially planned larger foreign direct investments (FDI), including land acquisition and PPA negotiations for two potential projects of 100 MW each and another of 50 MW. This investment was expected to exceed $250 million, reflecting HIVE’s confidence in Paraguay’s vision and leadership. However, the proposed 14% increase in energy tariffs, 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 Nvidia GPU chipset needed to participate in the AI boom.
A 100 MW project needs to attract substantial foreign direct investment to Paraguay and provide the essential capital to convert high voltage electricity into usable power for industry and homes. HIVE electricity payments would provide a stable US dollar benefit of over US$100 million over three years, offering a reliable monthly income in addition to helping build the electrical infrastructure. This provides a synthetic US dollar hedge that banks could not match. In addition, the cost of the electrical infrastructure needed to scale down the high voltage power for industrial and residential use is estimated at around US$16 million, which would create 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 by approximately 36% against the US dollar over the past five years and by around 16% in the past year, supporting the importance of stable foreign investment and US dollar inflows for Paraguay's economic stability and growth.
Mr Holmes, a global fund manager, highlighted: “Research supports the fact that more electricity infrastructure drives faster economic growth. Studies by the World Bank and the IEA highlight that investments in electricity infrastructure are crucial for economic development, improved productivity, industrial growth and quality of life.”
HIVE is not alone in its cautious attitude. Other public Bitcoin mining companies gathered at the largest Bitcoin conference last week in Nashville and said that they are also re-evaluating their investment plans in Paraguay due to the proposed fee increase and contractual restrictions. This collective response at the conference in Nashville, where former President Trump and Robert F. Kennedy Jr. endorsed the importance of Bitcoin and Bitcoin mining in their political campaign for this year’s US presidential election, 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 demonstrated by our successful operations in Sweden and Canada. We value the opportunity to contribute to Paraguay’s economic growth and remain committed to promoting an enabling environment for business and investment.
