Update on operational progress through 2025
At the end of Q125 the Taiga Cloud business started a major upgrade of its infrastructure
to enable software-defined, on-demand access to its GPU estate. The upgrade, together
with additional technology partnerships, have improved Northern Data Group’s ability
to serve existing customers as well as attracting new customers.
As of end-Q325, 15,000 GPUs of the overall 22,000 NVIDIA H100 and H200 estate have
been allocated to customers committing to spot, on-demand and reserved contracts.
These customer commitments have expanded from 11% estate utilisation in August to
more than 60% expected in October. This dramatic ramp-up of utilisation has been achieved
by customers moving to a healthy mixture of both on-demand and fully reserved contracts.
This move towards reserved and on-demand customer engagements is expected to continue
and should steadily result in a more predictable and higher utilisation rate, driving
up per GPU hour pricing with an obvious favourable impact on revenues. Customers using
the Northern Data capacity include leading AI labs, US and European AI native start-ups,
and global providers of sovereign and enterprise cloud solutions.
Peak Mining sale progresses in two phases
Since management’s last update at the time of the H125 figures, significant progress
appears to have been made, although the proposed disposal looks set to be executed
in two stages. There is interest from a third-party global infrastructure asset management
firm to acquire the two sites Texas sites at Corpus Christi. Each of these sites has
potential capacity of up to 300MW, though one site is essentially only enabled with
basic power infrastructure and little else in terms of currently running GPU usage.
The other site is in operation and has 100MW of capacity devoted to Peak Mining. It
accounts for the largest portion of Peak Mining’s 7.9 EH/s mining capacity at the
end of last year. At this stage, the third-party infrastructure asset management fund
is undertaking due diligence under an exclusivity agreement and is exploring suitability
of the sites for traditional high-performance computing usage.
The other Peak Mining locations (North Dakota and Maysville, Georgia) are to be divested
to a special purpose vehicle that is backed by Northern Data’s largest shareholder
(Tether Holdings) for a consideration of $50m. The closing of this transaction and
proceeds are expected in the current month. Based on prior disclosures, we believe
the mining capacity of these sites is around 2.0–2.2 EH/s and so it would appear they
are being sold a rough valuation of $25m per EH/s. This figure is low (roughly 50%)
compared to those seen in previous transactions during 2024, reflecting the sizeable
shift in valuations in recent months.
In total, we estimate that the cumulative capital investment in the current Peak Mining
operations is $250–300m.
Ongoing interest from Rumble
In Rumble’s press release of 10 August, Rumble stated its proposed transaction to
acquire Northern Data was based on the assumption that the Peak Mining businesses
would be sold prior to completion. In light of the progress on Peak Mining’s asset
sales, we understand that interest from Rumble remains.
When interest from Rumble was first publicly declared, the proposed terms of the offer
(2.319 newly issued Rumble shares per Northern Data share) valued Northern Data’s
shares at a 33% discount to their price at the time. Were a similar exchange ratio
to be used now, the offer would value Northern Data’s shares at a small (4%) premium.
Forecast changes
We have revised our forecasts, principally to remodel the revenue trajectory at Taiga
Cloud. After the technical upgrade that caused disruption during 2025, we expect a
more reliable sequential quarterly improvement in revenues. Our revenue forecasts
for Peak Mining have not been not materially altered and the business appears to be
running with a relatively stable revenue run rate of €25–30m per quarter.
We have also incorporated the annualised cost savings that have been achieved through
Northern Data’s active cost-cutting programme. These will yield annualised cost savings
of €15–20m. We have also updated our cash flow forecasts to incorporate the €50m proceeds
expected from the Peak Mining asset sale (due to be completed before the end of October).
These proceeds more or less offset the reduced operating cash flow resulting from
revised forecasts and leave our FY25 net debt expectations broadly unaltered at €687m.
Northern Data has suggested that certain other non-core assets and a historic equity
investment have been highlighted for sale to contribute to the group’s overall liquidity
but, until these are confirmed, they are not incorporated into our forecasts. Management
has suggested that the business should be able to generate positive operating cash
flows by year-end 2025. Our forecasts model positive operating cash flow for FY26.
