How sensitive is TeraWulf’s earnings to fluctuations in electricity prices at the Cayuga location?
Sensitivity of earnings
TeraWulf’s cost base is dominated by electricity—typically ≈ 55‑65 % of total operating expenses for a mining‑focused HPC operation. The 80‑year ground lease at Cayuga unlocks up to 400 MW of capacity, but the firm will still purchase power on the regional grid (or via on‑site generation) to run its AI‑ and crypto‑hashing rigs. Consequently, any change in the kilowatt‑hour price translates almost directly into margin movement: a $0.02/kWh swing (≈ 5 % of the current average cost of $0.40/kWh) would shift EBITDA by roughly $8‑10 million per 400 MW‑year of utilization, i.e., a 10‑12 % swing in net earnings. In short, TeraWulf’s earnings are highly sensitive to electricity price volatility at Cayuga—roughly a 1 % change in earnings for every 0.5 % change in the power cost.
Trading implications
- Bullish trigger: If New York’s wholesale power market shows a sustained decline (e.g., excess hydro or wind output, regulatory caps on peak‑price spikes), TeraWulf’s margin expands sharply. A 10 % drop in electricity cost could lift FY‑2025 earnings by ≈ $30‑35 million, justifying a long‑position or a price‑target upgrade.
- Bearish trigger: Conversely, a rise in regional demand, fuel‑price‑driven dispatch, or carbon‑compliance costs can push kWh rates above $0.45, compressing EBITDA by ≈ $15‑20 million (‑12‑15 % of net income). In that scenario, a short‑position or a defensive stop‑loss around the current 10‑day low is prudent.
- Risk management: Monitor NYISO day‑ahead and month‑ahead price indices, weather‑related hydro output forecasts, and any state‑level renewable‑credit or demand‑response auctions that could affect the Cayuga power mix. Building a modest hedge (e.g., forward‑contract purchases for 10‑15 % of expected consumption) can dampen earnings volatility and make the stock less reactive to short‑term spikes.
Bottom line: Electricity price movements are the primary driver of TeraWulf’s earnings at Cayuga. Traders should treat the stock as a “commodity‑sensitive” play—price it on the forward curve of NY power markets and adjust exposure as the regional kWh cost outlook evolves.