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Executing at Existing Sites; Data Center Expansion Plans Now Include AI

Execution at the operating sites continues. Soluna recently issued an operating update highlighting the strong performance at the 50 MW Project Dorothy 1 (both 1A and 1B) and the 25 MW Project Sophie. The company’s proprietary Maestro OS software is performing flawlessly, the average power cost YTD is $30/MWh, and the fleet of data centers is delivering a power usage effectiveness (PUE) of just 1.01. Soluna also announced new customer relationships that will replace 60% of 25 MW at Project Sophie with new contracts at more profitable terms. AI pilot at Project Dorothy 2 signals the beginning of the next phase in the company’s growth. Soluna announced that the development of Project Dorothy 2 will include a scalable pilot for high-performance computing that can be used to support AI workloads. We see this as an important step that will expand the end-market for Soluna’s data center solution and deliver on the company’s previously stated goal to evolve to meet the demands of high-performance computing. In conjunction, the company announced it is designing upgrades to its Modular Data Center design to better meet the increased demands of AI computing. Regains NASDAQ compliance with stock split, strange market reaction. In mid-October, the company implemented a reverse split that resulted in the company receiving compliance with NASDAQ’s minimum bid Listing Rule 5550(a2). The split reduced the shares outstanding from ~37.3 million to ~1.5 million. Interestingly, the market capitalization dropped by more than 50% following the split even though a stock split has no impact on the value of a company. Shares were trading around $0.20 before the split, so 37.3 million shares X a share price of $0.20 equals a $7.45 million market cap, which would be equal to 1.5 million shares X $4.98 (a $7.45 million market cap). Put another way, is someone wealthier with four $5 bills or one $20 bill? Another 250 MW added to the long-term pipeline, near-term Project Dorothy 2, and Project Kati moving along. Soluna has finalized the site layout for the next 50 MW at Project Dorothy 2, with financing close to finalization for an initial 16 MW. The 166 MW at Project Kati continues to progress, with the ERCOT studies process as well as drafting power purchase agreements (PPA) with power producers and initial proposals for equipment for the site. Soluna has stated that each 25 MW (100% owned) can contribute $6-7 million in annual project-level EBITDA. Soluna helps solve the problem of power curtailment and in turn supports the growth of renewable energy. Renewable power plants are increasingly needing to ‘curtail’ their power generation due to oversupply. By purchasing electricity that would have otherwise been unsold, Soluna helps improve project economics for renewable power and further its growth on the grid. Moreover, data centers can easily ramp down their power use to help balance the grid in times of extreme power demand.