BitFuFu and AXP Energy off-grid power partnership: Analyst...

BitFuFu and AXP Energy off-grid power partnership: Analyst Report

Overview and strategic goals

BitFuFu, a NASDAQ-listed Bitcoin mining company, has partnered with AXP Energy, an oil and gas producer, for off-grid power generation. This partnership uses natural gas from AXP's Colorado wells to generate electricity directly at the mining site. A 14-day trial successfully generated 1.5 megawatts (MW) of power, with over 90% uptime after improvements. BitFuFu will supply mining equipment, and AXP will provide gas and power infrastructure, aiming to expand to 25 MW by the end of 2025. The companies are considering similar projects elsewhere in North America.¹

Financial impact and cost savings

Generating power on-site significantly reduces BitFuFu's electricity costs. By using stranded gas and avoiding grid charges, electricity costs could match or improve upon BitFuFu’s existing rates of $0.03–$0.042 per kilowatt-hour (kWh).² BitFuFu’s production cost is approximately $18,000 per Bitcoin at existing low-cost sites.³ Achieving similar costs at the Colorado project could deliver millions in annual savings, improving profit margins and resilience against market fluctuations.²,³

Mining efficiency and power stability

Off-grid power improves mining efficiency through higher uptime and operational stability. During the pilot, uptime exceeded 90%, allowing nearly continuous mining operations.¹ Reliable gas supply from AXP's 24 gas wells supports consistent electricity generation, avoiding grid-related outages or interruptions. Better power stability ensures efficient hardware operation, reducing equipment wear and improving overall Bitcoin production performance.¹

Market implications and investor outlook

The partnership strategically positions BitFuFu within the competitive Bitcoin mining industry. Securing low-cost, stable energy supports BitFuFu’s goal of achieving 1 gigawatt (GW) total power capacity by 2026.² Similar partnerships across the industry show this off-grid model is becoming more common among crypto miners, highlighting BitFuFu's competitive foresight.⁵

Investors will benefit from lower production costs, higher profit margins, and increased operational stability. Success in this partnership could enhance BitFuFu's market position, attract further investment, and enable future expansions.²,³ this off-grid model provides BitFuFu with a distinct competitive advantage by protecting operations from fluctuating grid energy prices and potential supply disruptions. This strategic advantage may attract long-term institutional investors seeking stability and predictable returns in the volatile cryptocurrency market.

If BitFuFu continues to execute efficiently on similar partnerships and expands its capacity as projected, it could significantly increase its market share. The demonstrated success of this initial off-grid project will build investor confidence, potentially increasing BitFuFu's valuation and share price. Furthermore, showcasing a sustainable and cost-efficient energy strategy positions BitFuFu favourably for environmental, social, and governance (ESG)-focused investors, broadening its appeal in the financial market.²,⁵

References

1. BitFuFu Holdings Ltd. BitFuFu partners with AXP Energy to pilot off-grid power solution. PR Newswire. Available at: https://www.prnewswire.com/news-releases/bitfufu-partners-with-axp-energy-to-pilot-off-grid-power-solution-302897573.html (2024).

2. BitFuFu Holdings Ltd. BitFuFu announces new US mining site with low-cost power agreement. GlobeNewswire. Available at: https://www.globenewswire.com/news-release/2024/01/29/2859342/0/en/BitFuFu-Announces-New-U-S-Mining-Site-with-Low-Cost-Power-Agreement.html (2024).

3. BitFuFu Holdings Ltd. Investor presentation Q1 2024. BitFuFu Investor Relations. Available at: https://www.bitfufu.com/investors/presentations/q1-2024-presentation (2024).

4. Kramer, L. Mining Bitcoin off the grid: opportunities and risks. Energy Rep. 7, 123–129 (2023).

5. Zhao, J. & Liu, T. Energy sourcing strategies of leading Bitcoin miners. Energy Econ. 125, 225–234 (2023)