Riot Earns $71.2M Selling Power in TX, Bitcoin Up 131%

Key Takeaway

• Riot Platforms Inc. earned $71.2 million in 2023 by selling pre-purchased power back to Texas' grid, leveraging energy market volatility.
• Despite challenges, Riot reported a Q1 revenue of $79.3 million, up from $73.2 million year-over-year, amidst a 131% rise in Bitcoin prices.
• The company's strategic power purchase agreements and flexible operation adjustments position it uniquely to capitalize on energy market dynamics.

Energy Market Dynamics

Riot Platforms Inc., a leading Bitcoin miner based in Castle Rock, Colorado, is poised to leverage the volatile energy market in Texas, according to its CEO. The company, which operates one of the world's largest Bitcoin mining sites in Texas, has historically profited from energy shortages by selling pre-purchased power back to the state's grid at higher rates. In the past two years, Riot has generated significant revenue through power credits, earning $71.2 million in 2023 and $27.3 million in 2022. The CEO, Jason Les, highlighted the unpredictability of the upcoming summer, citing external factors like weather and generation performance as variables outside their control. However, he expressed confidence in the company's position to capitalize on opportunities due to its fixed-price power purchase agreements and a developed power strategy.

Bitcoin Mining and Power Strategy

Bitcoin mining, known for its high energy consumption, involves validating transactions on the blockchain to earn Bitcoin rewards. Riot Platforms has secured large amounts of electricity at fixed prices, allowing it to adjust operations based on energy market conditions. This flexibility enables the company not only to sell power during shortages but also to benefit from low or negative-priced power hours. The ability to respond dynamically to spot prices of power distinguishes Bitcoin miners like Riot from traditional large-scale power consumers who cannot as easily adjust their operations.

Financial Performance Amid Challenges

Riot Platforms reported a first-quarter revenue of $79.3 million, an increase from $73.2 million in the same period the previous year. This growth was attributed to a 131% rise in Bitcoin prices, although it was partially offset by a decrease in production. The company produced 1,364 Bitcoin tokens, a 36% drop from the previous year's first quarter, with the cost per token mined rising significantly. The increase in mining costs was primarily due to a surge in mining difficulty, a measure of the computing power required to mine Bitcoin. The industry faces several challenges, including higher energy costs, increased competition, and the impact of the "halving" event, which reduces the reward for mining Bitcoin and has led to a decrease in daily production of new tokens.

Management Quotes

• Jason Les, CEO of Riot Platforms Inc.:

  "So how it plays out in this summer and mainly Q3 coming up here, it is hard to predict, it’s going to be based on external factors like weather and generation performance that we cannot control... However, because we have this 345-megawatt fixed-price power, because we have these blocks and because of what we’ve learned from the power strategy that we’ve developed, we are in a really good position to act on the opportunities when they occur here." "Besides selling power when that option is more attractive than Bitcoin mining, 'we’ll just be responding to the spot prices of power as they occur there,' which also gives us the benefit of capturing those very low-priced or negative-priced hours when they occur as well."