New ERA Energy & Digital, Inc. Q3 FY2026 earnings call

Key managerial messages and operational updates include:

• Strategic Pivot to Self-Execution:

  • New Era has elected to execute and deliver Phase 1 independently, moving away from a potential Joint Venture structure.
  • This decision was driven by the desire to control destiny, reduce execution risk, and leverage a newly assembled world-class team with deep experience from Microsoft, Meta, AWS, and Cyrus One.
  • The tenant specifically valued this self-execution model due to the team's focus and capability.

• Power Positioning and PPA:

  • Secured a 20-year Power Purchase Agreement (PPA) for up to 207 megawatts via an existing grandfathered private-use network (behind-the-meter), avoiding ERCOT’s Batch Zero constraints.
  • Posted $118 million cash collateralized letter of credit to secure power rights.
  • Power availability is targeted for Q3 2027, with Ready For Service (RFS) in Q4 2027.
  • Vistra receives a 5% non-voting stake in the power phase as part of the partnership alignment.

• Lease Negotiations and Tenant Status:

  • Advanced negotiations are underway for a definitive lease for Phase 1 with a leading global technology company under a non-binding Letter of Intent (LOI).
  • Phase 2 lease documentation is being worked on concurrently but separately; Phase 1 can proceed without Phase 2 completion.
  • Exclusivity is currently held with this single tenant, halting other conversations until lease execution.

• Modular Construction Approach:

  • Adoption of a modular build strategy for Phase 1, expected to reduce build costs by more than 50% compared to traditional developments.
  • Modular approach allows parallel site preparation and offsite work, accelerating timelines and reducing reliance on large on-site crews amid labor shortages.
  • Phase 2 plans involve approximately 550 MW of new onsite islanded generation with Underhead Energy Solutions, bringing total planned capacity to ~757 MW.

• Site Progress and Community Stewardship:

  • Site preparation (clearing, grading, remediation) is underway on 493 acres, with an additional 99 acres under contract to reduce easement constraints.
  • Emphasis on responsible development: closed-loop cooling systems to limit freshwater consumption and partnerships to evaluate treated produced water reuse from oil/gas operations.
  • Active engagement with local communities (Dexter County, City of Odessa) to ensure social license to operate.

• Balance Sheet and Funding:

  • Closed a $64 million PIPE to repay Macquarie borrowings and support leasing/development activities.
  • Cash position stands at $187 million ($49 million unrestricted, $138 million restricted/collateralized) as of October 31, 2026.
  • Debt reduced to $20 million outstanding on Macquarie facility, fully cash-collateralized.
  • Plan to restructure LC arrangements post-lease to release restricted cash for development use.

The transcript does not provide specific financial performance data or revenue contribution percentages for distinct product segments, as the company is currently in the development phase of its primary asset, the Texas Data Center Development Campus (TCDC). Financial highlights are focused on corporate balance sheet strength rather than operational segment results.

Management provided the following forward-looking guidance and timing expectations:

• Power Availability: Expected in Q3 2027.
• Ready For Service (Phase 1): Targeted for Q4 2027.
• Delivery (Phase 2): Anticipated in Q1 2028.
• Air Permit Approval: Management anticipates approval of the standard air permit application filed with the Texas Commission on Environmental Quality (TCEQ) by the end of the current year.
• Build Cost Efficiency: Guidance remains that Phase 1 and Phase 2 build costs will be substantially lower (less than half) than comparable traditional data center developments due to the modular approach.
• Capital Requirements: Specific capital outlay details will be disclosed once agreements are finalized. Management aims to minimize upfront funding requirements by leveraging tenant relationships for design and supply chain commitments.

Discussion of risks and operational considerations includes:

• Regulatory and Political Risk: Potential impact of new state administration policies regarding permitting for projects still in the approval process, though New Era argues it is insulated due to having permits already in hand.
• Market Volatility: Challenging backdrop with volatile capital markets and investors demanding stricter scrutiny on data center funding models.
• Supply Chain Constraints: Elevated competition for skilled labor and long-lead electrical equipment (e.g., transformers), mitigated by early vendor engagement and tenant supply chain leverage.
• Execution Risk: Dependence on achieving seamless coordination between offsite modular manufacturing and onsite site preparation to meet aggressive Q4 2027 RFS targets.
• Water Resource Dependency: Reliance on evaluating produced water treatment solutions to meet industrial cooling needs without straining local freshwater supplies.

Q: Analyst Mike Grondahl asked if the Phase 1 modular build structure mirrors recent industry trends (like Riot/Anthropic) where build costs are ~50% lower than traditional methods, and if this applies to Phase 2. / A: CFO Ted Warner confirmed the structure is similar, noting that leading tech companies are adopting modular builds for speed to compute. He stated that while Phase 1 is the immediate focus, Phase 2 is likely to look remarkably similar to Phase 1, though details are still being finalized with the client.

Q: Analyst Brian Baratian questioned whether the company would pursue a JV for monetization value, citing Cipher’s earnings call, and asked about the impact of Texas Governor Hinojosa’s potential policy changes on permits. / A: CFO Ted Warner explained there is no JV; New Era is purchasing the substation/equipment from Vistra to transfer power rights, securing long-lead items. CEO Charlie Nelson added that New Era is insulated from political risks because permits are already issued, and their proactive community engagement aligns with the new administration’s goals for social license.

Q: Analyst Brian Baratian asked why management used the term "tenant" instead of "hyperscaler" and if demand remains strong from diverse counterparties. / A: CFO Ted Warner clarified they are under exclusivity with a leading global technology company. He noted that prior to securing power, these entities were competitors; now that power is secured, demand is high, but they selected this partner for the best chance of a high-quality lease in the current market.

Q: Analyst Kevin Pimentel asked for clarification on the timeline gap between power availability (Q3 2027) and Ready For Service (Q4 2027). / A: CDO Evan Pierce explained the gap involves building short distribution lines from Vistra’s plant to New Era’s site, installing an on-site switching station, completing final site prep for module delivery, and commissioning. He emphasized that the modular nature avoids long stick-built construction delays, making the timeline efficient.

Q: Analyst Nick Giles asked what technical or economic items remain unresolved in the Phase 1 lease negotiations and how long-lead items are being managed. / A: CFO Ted Warner stated economics are agreed upon, with only minor technical SLA details remaining. COO Jose Rodriguez added that they are engaging vendors in parallel for reservations (e.g., transformers) but require final lease design specs to complete procurement. CEO Nelson noted that since they operate at usable voltage ranges, they avoid typical transmission-level transformer constraints.