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Riot Blockchain (RIOT) acquires power distributor for $50m

By Robert Davis

19:00, 1 December 2021

Bitcoin mining farm and IT hardware
The deal consists of more than 715,000 shares of Riot’s stock and $25m in cash - Photo: Shutterstock

Riot Blockchain (RIOT) is purchasing ESS Metron, a power distribution company out of Denver, Colorado, for $50m (£37.55m), Riot announced on Wednesday.

Riot’s stock was up more than 5.6% to $39.57 after the announcement.

Acquisition details

The deal consists of more than 715,000 shares of Riot’s stock and $25m in cash that is funded by Riot’s balance sheet.

Last quarter, Riot reported having more than $57m in cash, according to its earnings statement.  

Riot CEO Jason Les said the acquisition will help Riot “continue its fast-tracked expansion project as the company benefits from internalising ESS Metron’s engineering and industry expertise”.

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About ESS Metron

ESS Metron is a developer of power distribution systems and substations that offers design engineering services and customisable products.

The company is known for producing low- and medium-voltage switchgears, integrated power distribution centres and modular control buildings, according to its website.

ESS Metron is expected to operate as an independent subsidiary of Riot, and its entire workforce is being retained through the completion of the deal.

ESS Metron CEO Stephen Howell said the acquisition is an exciting opportunity to grow and “actively (collaborate) with Riot in its ongoing expansion efforts”.

Power-generating infrastructure

Riot said that acquiring ESS Metron, which already operates its Whinstone mining factory outside of Rockdale, Texas, will help Riot expand its power-generating infrastructure up to 700 megawatts by the end of the second quarter of next year.

According to ESS Metron’s website, the Whinstone factory currently generates 300 megawatts of power out of a total capacity load of 750 megawatts.

ESS Metron’s low-voltage switchgears could help Riot increase its power production by reducing incoming power to the level necessary to operate antminers, encrypted digital servers created by Beijing-based Bitmain that Riot uses to mine bitcoin.

A Riot investor presentation said that the company plans to increase its antminer stock to 119,000 by the end of Q2 2022.  

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As of 31 October, Riot had a stock of 27,270 antminers, according to its latest earnings report.

Immersion cooling

The ESS Metron acquisition will also help Riot expand its immersion-cooling mining operations, which are seen as more efficient than traditional mining operations.

Immersion cooling works by submerging mining hardware into specialised liquids that help keep the machines cool. The heat generated by the machines is absorbed by the liquid, which is then circulated out of the cooling chamber into another unit that then re-chills the liquid. The liquid is then returned to the cooling chamber and the process begins again.

Riot said back in October that the company has performed its own immersion-cooling tests and found that the technology increased its mining efficiency by 25%.  

Half of Riot’s planned 400 megawatt expansion at Whinstone is expected to come from its immersion-cooling operations, the company said.

Hash rate

Riot’s rapid expansion of its antminers and immersion-cooling operations are crucial to the company increasing its hash rate to 8.6 EH/s by the fourth quarter of next year.

Hash rate refers to the total computational power that a miner uses to produce a “hash,” or a series of algorithmic codes that define crypto projects. Miners compete against one another to figure out these hashes, which are then used to complete blocks on the blockchain. Each time a block is completed, a miner gets a new coin.

Miners with more computing power inevitably win most of the time because their machines can produce hashes – basically guesses – faster than miners with lower hash rates.

According to its Q3 2021 earnings, the company increased its hash rate by 63% to 2.6 EH/s by deploying 9,500 S19 Pro Antminer models at Whinstone.

The S19 model mines 110 terahashes per second, making it the most powerful model currently on the market, according to its product specifications.

Riot says approximately 95% of its self-mining fleet will consist of S19 antminers that are expected to produce 284 megawatts of power when they are fully operational.

Read more: Crypto-linked US stocks slump on bitcoin sell-off

Markets in this article

BTC/USD
Bitcoin / USD
65607.55 USD
-291.6 -0.440%
RIOT
Riot Blockchain, Inc.
11.37 USD
-0.26 -2.250%
RIOT
Riot Blockchain, Inc.
11.37 USD
-0.26 -2.250%

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