Alpha Compute signs US$5.5M deal for Pennsylvania gas wells to power an AI data centre

The cheapest electricity an American data centre can buy is the gas under its own land, and in Pennsylvania the two are sold together. Alpha Compute Corp. NASDAQALP, which rents out GPU capacity to finance, defence and media customers, said on Tuesday that it had signed binding agreements to buy more than 300 acres of Pennsylvania land at a price it puts at US$5.5 million. More than 75 oil and gas wells stand on that ground, and the buyer is worth US$6.7 million on the market.

The purchase is the second Pennsylvania property Alpha Compute has put under contract since August. It agreed on Aug. 11 to buy a campus in Tioga County for US$55 million, so the two together set about US$60 million of land against a market value near a tenth of that.

Shares fell 4.6 per cent to US$4.35 at the close in New York on Tuesday, from US$4.56 on Monday. Volume reached 74,946 shares against a daily average of 140,347. The exchange's own data leaves about 1.55 million shares outstanding at that price, the count that came out of a one for fifty reverse split on Sept. 9.

Tuesday's release names what the money buys and little else. The acreage carries surface, mineral and gas rights over both the Marcellus and the Utica formations, and the package takes in the wells, their pump jacks, maintenance buildings, heavy equipment and the gathering lines that connect them. Alpha Compute says the wells are producing and the business earns an operating profit, though its estimate of the oil still in place rests on historical documentation rather than a current reserve report. The release does not name the seller or give a closing date.

"Given the USD $5.5 million acquisition price, we anticipate a substantial revaluation of the assets," Enzo Villani, executive chairman and president of Alpha Compute, said in the release.

Gas Behind The Meter At 5.85 Cents A Kilowatt Hour

A compute company buys wells for the price of the electricity they make. The campus Alpha Compute is designing in northern Pennsylvania, which it calls Alpha Energy 01, would burn gas produced on its own property behind the meter. The design starts at 200 megawatts with room to reach 1 gigawatt, and it would draw nothing from the regional grid. A third party evaluation the company set out on Sept. 10 concluded that the Marcellus resource under that site could run 200 megawatts continuously for ten years. It put the all in delivered cost at about 5.85 US cents a kilowatt hour, against the 8 to 10 cents a commercial or industrial customer pays in the PJM market. Those figures still have to be validated, and the company says no power or data centre capacity is operating at the site today.

The Tioga campus is not paid for either. An amendment on Sept. 10 to a term sheet signed Aug. 11 kept the price at US$55 million and cut the cash due at closing to US$8 million. The sellers are financing the remaining US$47 million through a note at 6 per cent, interest only, on a five year balloon and with no recourse to Alpha Compute. That note is secured by the land and the mineral interests alone, so the data centre, the generators and the computers stay outside the collateral. Once gas is flowing, half of the company's share of the proceeds goes to principal each quarter. The property runs to about 350 surface and pore space acres with roughly 1,800 net unleased Marcellus mineral acres beneath it.

Nasdaq Gave The Company Until March 1

Alpha Compute is buying land while it sits outside the listing rules of the exchange it trades on. Nasdaq told the company on March 2 that its shares had closed below US$1.00 for 30 consecutive business days. On Aug. 31 the exchange granted a second compliance period of 180 days under listing rule 5550(a)(2). That period runs to March 1, 2027. The split that followed on Sept. 9 lifted the price well clear of the threshold and the shares have closed above US$1.00 in every session since, though the exchange still carried Alpha Compute on its list of noncompliant companies after Tuesday's close.

Buying generation rather than waiting in an interconnection queue is one of the routes open to the small companies chasing artificial intelligence tenants. New Era Energy & Digital, Inc. NASDAQNUAI took the other one this month, contracting as much as 207 megawatts for 20 years for its data centre near Odessa, Texas. Holding that power in its own name cost it a letter of credit of US$116 million, more than 20 times what Alpha Compute is paying for its Pennsylvania wells.

Google took a third route this month, paying for performance upgrades at two Georgia nuclear plants that add about 96 megawatts to the grid, capacity bought from a regulated utility rather than dug out from under a field.

Read more: Georgia Power and Google to fund 96 MW of nuclear uprates at Vogtle and Hatch

Alpha Compute has not said when either Pennsylvania purchase closes. The Tioga campus still needs a review by the county planning commission and a vote by the board of commissioners. An environmental and community impact analysis, a water feasibility study and permits from the Pennsylvania Department of Environmental Protection all come before construction, and none of them carries a date. The compliance period on the listing runs out on March 1, 2027.