Business Context and Reporting Period
This Form 6-K filing by Iris Energy Limited (IREN) dated November 21, 2022, provides a corporate update regarding default notices on limited recourse equipment financing facilities and preliminary financial results for the three months ended September 30, 2022, and the month of October 2022.
Key Financial Metrics
- Revenue: $16.2 million for the three months ended September 30, 2022 (up from $10.4 million in the prior year period).
- Electricity Costs: $6.6 million for the three months ended September 30, 2022 (up from $1.6 million in the prior year period).
- Cash and Cash Equivalents: $57.4 million as of September 30, 2022 (including Non-Recourse SPVs); $52.7 million as of October 31, 2022 (excluding Non-Recourse SPVs).
- Debt Outstanding: Approximately $104.7 million aggregate principal as of September 30, 2022. As of November 18, 2022, the lender claims aggregate indebtedness of approximately $107.8 million for Non-Recourse SPV 2 and 3, and $1.0 million for Non-Recourse SPV 1.
- Operating Hashrate: Average of 2,009 PH/s for the three months ended September 30, 2022; 3,903 PH/s for October 2022.
- Bitcoin Mined: 780 Bitcoin for the three months ended September 30, 2022.
Material Changes and Operational Impact
The filing details a material adverse event involving three limited recourse equipment financing facilities held by wholly-owned special purpose vehicles (Non-Recourse SPVs).
- Default and Acceleration: On November 4, 2022, the lender issued default notices. On November 18, 2022, the lender demanded immediate repayment of approximately $107.8 million related to Non-Recourse SPV 2 and 3, and $1.0 million related to Non-Recourse SPV 1.
- Asset Seizure and Capacity Loss: The Company expects the lender to enforce rights in the collateral, including approximately 3.6 EH/s of miners securing Non-Recourse SPV 2 and 3. Following the default notice, hosting arrangements for these SPVs were terminated, and none of the 3.6 EH/s of miners are currently operating.
- Remaining Capacity: Excluding the non-operating miners, the Group has approximately 2.4 EH/s of miners as of November 20, 2022 (1.1 EH/s in operation, 1.3 EH/s in transit/pending deployment).
- Available Capacity: The termination of hosting arrangements freed up approximately 90MW of data center capacity.
Outlook, Risks, and Management Commentary
Management states that the Non-Recourse SPV 2 and 3 facilities were structured to protect the underlying business, but the SPVs produce insufficient cash flow to service their debt. The Company does not intend to provide further financial support to these SPVs unless a suitable restructuring agreement is reached.
- Strategic Options: The Group is exploring opportunities to utilize its available 90MW data center capacity for third-party hosting or self-mining. This includes utilizing $75 million in prepayments made to Bitmain for an additional 7.5 EH/s of contracted miners.
- Development Pipeline: Construction continues at the Mackenzie site (British Columbia) and the Childress site (Texas). Decisions on expanding Childress beyond 20MW are being assessed based on available capacity in British Columbia.
- Risk Factors: The filing highlights substantial doubt about the Company's ability to continue as a going concern. Risks include the loss of collateral (miners), potential litigation, and the material adverse effect on financial condition and share value.
- Future Updates: An investor briefing is scheduled for December 2022 to discuss go-forward strategy.
Investor Verification Checklist
- Verify the status of the $107.8 million debt acceleration demand and the likelihood of lender foreclosure on the 3.6 EH/s of miners.
- Confirm the operational status of the remaining 1.1 EH/s of miners and the timeline for deploying the 1.3 EH/s in transit.
- Assess the viability of monetizing the $75 million Bitmain prepayment and the 90MW of newly available data center capacity.
- Review the Company's liquidity position ($52.7 million excluding SPVs) against upcoming capital commitments and operating expenses.
- Monitor the outcome of the dispute regarding the $1.0 million facility with Non-Recourse SPV 1.