Unpredictable electricity cost could have caused Argo’s troubles

As rumors about Argo’s doable chapter proceed to unfold, extra details about what brought about the corporate’s troubles are unraveling.

The U.S.-based Bitcoin mining firm has seen its shares plummet within the second half of the yr because it struggled to maintain a constructive money circulate. In October, Argo did not safe a $27 million strategic funding that was supposed to enhance its liquidity place.

On the time, the corporate stated it was persevering with to search for an answer to its money drawback, however famous that it may fail to resolve its points. Initially of December, Argo by chance revealed a petition for chapter.

A screenshot of a particular announcement for Argo’s stakeholders was reportedly leaked, displaying that the corporate could be getting ready to file for chapter.

Based on a latest report, Argo’s failure to safe a fixed-price PPA earlier this yr may very well be what brought about its issues.

Jaran Mellerud, a analysis analyst with the Hashrate Index, famous that Argo said they’d entry to electrical energy priced at $0.02 per kWh. The quantity was reportedly shared in a March 2022 investor presentation.

That is from Argo’s investor presentation from March 2022. Their said electrical energy worth of $0.02 per kWh grew to $0.06 per kWh. pic.twitter.com/dcObBxAj1n

— Jaran Mellerud (@JMellerud) December 12, 2022

Nonetheless, analyzing Argo’s November manufacturing report confirmed that the electrical energy worth the corporate pays is definitely $0.06 per kWh. The precise electrical energy is derived from Argo’s reported manufacturing margin of 29%.

The threefold improve in electrical energy value led to a considerably increased improve in manufacturing value. Based on the report, Argo’s electrical energy value of mining 1 BTC is round $12,400. If the corporate paid $0.02 per kWh because it said in its investor pitch, the price of mining 1 BTC could be round $4,000.

Rising the electrical energy worth from $0.02 to $0.06 per kWh leads to an enormous improve in manufacturing value.

Argo’s electrical energy value of mining 1 BTC is $12.4k. It could solely be $4k in the event that they paid $0.02 per kWh. pic.twitter.com/Vm4vhHs1eH

— Jaran Mellerud (@JMellerud) December 12, 2022

The vast majority of Argo’s mining operation is situated in Texas. The Electrical Reliability Council of Texas (ERCOT), the group working Texas’s electrical grid, has seen its electrical energy worth skyrocket because the starting of the summer season. This meant that the $0.02 per kWh worth Argo touted to buyers was short-lived.

Bitcoin miners are recognized to safe fixed-price energy buy agreements (PPAs), a contract between power patrons and sellers that ensures a set worth for each kilowatt of power. These contracts present Bitcoin miners with much-needed worth stability as they take away one of many largest variables from their manufacturing prices.

It now appears that Argo did not safe a fixed-price PPA when increasing to Texas and skilled large losses when the value of electrical energy started growing.

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