Cipher Digital on Colchis, Data Center #3

Cipher Digital's 2025 annual report had much to say about their Colchis project, Tom Green County's third possible data center.   It is a joint venture although Cipher Digital never shares their joint venture partner(s) or from whom they purchased their majority interest.

The Tom Green County Appraisal District shows four tracts of land owned by Colchis.  They are next to the land currently leased by SkyBox Data Centers for their project, which is currently being marketed by Emergent Data Centers as SA1.  Both sited in that location to access a large AEP electrical substation.  

Texas electricity regulator ERCOT is running a Batch Zero competition for the state's data center explosion.  That means SkyBox and Cipher are competing for the same monstrous amount of electricity.  

Cipher's Annual Report states: 

Colchis Site 

In November 2025, we purchased a majority interest in a joint venture entity to develop a new HPC site in West Texas capable of providing 1-GW, referred to as Colchis (the “Colchis Site”), under which we expect to hold a majority equity interest subject to final lease and development terms. The Colchis Site includes a fully executed direct interconnection agreement with American Electric Power (“AEP”) for a dual interconnection facility targeting energization in 2028 and options to buy approximately 620 acres of land adjacent to an existing substation.

Redeemable noncontrolling interest 

Redeemable noncontrolling interest represent a 47% noncontrolling ownership in Colchis, variable interest entity (“VIE”), and a consolidated subsidiary of the Company. The entity is deemed a VIE as it does not have sufficient equity-at-risk to finance its activities. As the managing member, the Company has the power to direct the activities that most significantly impact Colchis’s economic performance. Accordingly, the Company was determined to be the primary beneficiary of the VIE and therefore consolidates the entity in its consolidated financial statements. Redeemable noncontrolling interests are presented outside of permanent equity on the consolidated balance sheets as they are redeemable by the holders of the noncontrolling interest and the redemption is outside the control of the Company. The redeemable noncontrolling interests were initially recorded at their issuance date fair value of $30.3 million. The Company subsequently measures the carrying amount of the redeemable noncontrolling interests at the greater of (i) the initial carrying amount, increased or decreased for the noncontrolling interest’s share of net income or loss and its share of other comprehensive income or loss, and dividends or (ii) the redemption value. For interests that are  redeemable in the future, we recognize changes in the redemption value immediately as they occur.

Note 8:  Investment in Joint Ventures

In October 2025, the Company purchased 53% of the equity in Colchis LLC (“Colchis”), a joint venture of a potential 1 GW site in Texas, the “Colchis Site.” The Company is the managing member and consolidates Colchis, and records redeemable noncontrolling interest for the minority interest in the site. The Company deems the noncontrolling interest to be redeemable due to certain clauses in the agreement, which could trigger the redemption of the noncontrolling shares upon events outside of the Company's control. 

There were no changes in ownership of Colchis LLC for the year ended December 31, 2025 after the Company’s original investment.

Note 9:  Intangible Assets

 

The Company recorded amortization expense related to intangible assets of $0.6 million for the year ended December 31, 2025, $0.5 million for the year ended December 31, 2024, and $0.0 million for the year ended December 31, 2023. During the year ended December 31, 2025, the Company acquired strategic contracts for $56.6 million and $12.6 million related to the development of the Colchis and Ulysses sites, respectively, and wrote off $1.2 million of capitalized software related to software projects the Company is no longer pursuing.

There are mixed messages between the Annual Report and other Cipher corporate communications.  A November 3, 2025 press release stated:

In addition, Cipher today announced the formation of a joint entity to develop a 1-gigawatt (“GW”) site, named “Colchis”, in West Texas. Under the terms of the agreement, Cipher is expected to provide the majority of the financing, which would result in approximately 95% equity ownership assuming standard lease and development terms in a future HPC lease. 

The Colchis site includes a fully executed 1-GW Direct Connect Agreement with American Electric Power (“AEP”), under which AEP will construct the necessary dual interconnection facility for a targeted energization in 2028. Construction of the interconnection facility will proceed in parallel with ERCOT's final review and approval. The 620-acres of land under option sit adjacent to the existing substation, and the site has all the necessary characteristics for development of an HPC data center.

One said "purchased" the joint venture while the other said "formed."  One said 53% equity while the other said 95%.

I wonder if AEP's dual interconnection facility garners them an equity stake in Colchis.  It seems strange that AEP would pick one data center over another at this stage.  Shouldn't they work with whichever was approved by ERCOT via Batch Zero?  It feels like a thumb on the scale.  

However it is Texas where there are lots of thumbs and even more scales.