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.  

Texans Feel AI-Moed

Tom Green County residents are already facing the force of federal incentives and state of Texas subsidies luring hyperscale data centers to our area.  The imbalance may become greater if the federal government takes equity stakes in the major AI companies.

Four data centers are considering locating here, one in San Angelo proper and the other three in the county.  The Texas Tribune reported that nearly half of the 248 planned data centers will be outside of cities, in unincorporated areas.  

People in our area remember the shale boom.   The Carlyle Group's Jeff Currie compared the two in their voracious need for capital.  Abilene's experience with Lancium -"Stargate" is an amplified echo of our experience in the shale boom with rising rents, absurdly expensive hotel rooms and dangerous road conditions.  Many new workers arrived with their addictions and large dog breeds.  

That is our future if the State of Texas via ERCOT deems a project worthy of power and the Lords of Capital provide the necessary funding.  

Irion County Commissioners have two items on their upcoming agenda for June 9th at 9:00am:

6.  Options for having input on both public and private industrial/technological development within the county (Executive/Closed Session)

7.  Tax abatement agreements for economic development within Irion County (Executive/Closed Session)

"Data centers have become shockingly unpopular" is one recent headline and Texans have virtually no say as to whether they can come, where they can locate or how much local resources they can usurp.

That means a name change....and the TechGods offer "AI Factories."  Same thing, just slightly more attuned to economic development.  It also fits better with their desire to charge a piece rate for each AI product that comes off the factory floor.  TechGods have all the momentum with their control of state and federal government.

Responses vary across the country.  One mayor insulted data center opponents for the look of their homes.  The State of Ohio suspended giant tax breaks for data centers to evaluate their actual impact.

There is a very short window for federal and state elected officials to intervene and allow communities to strike more of a balance.  An AI equity stake by Uncle Sam is decidedly counter to that.  

So it should not be surprising that many Texans feel trapped in an AI-MO that is running us into a dangerous construction zone at high speed.  Let us out so we can never do this again.  Please.

Update 6-9-26:  At his time Irion County does not have any data centers interested, according to one county official.  There is a battery energy storage system project and new high voltage power lines are planned for parts of the county.   

It appears Irion County Commissioner were educated from outside attorneys on their rights, responsibilities and limitations in considering new industrial/technological employers.  As the County had not updated their tax abatement program in many years, this item needed attention should the County wish to offer abatements to future projects, like the BESS facility.

Tom Green County: Data Center Site #3 Revealed

San Angelo Chamber of Commerce executive Michael Looney stated that four data centers are interested in the area.  He did so at an Economic Development Board meeting.  

Two of the projects are known to the public.  A third has been revealed.

1)  The Skybox/Emergent in San Angelo is actively being marketed.  

2)  Beacon Data Centers expressed interest and met with the community, which clearly told them to look elsewhere.  They returned and met with Tom Green County Commissioners.

The other two sites have not been named, by interested party or location in the county. 

3) Cipher Digital (below is how I learned this). 

I sent a letter outlining my data center concerns to City Council (the subject of a future post).  San Angelo Mayor Tom Thompson replied:

If the regulations are put in place, the discussion moves to the economic impact, benefits, and risks.

I believe the data center project adjacent to Skybox continues to move forward, as it does not have the restrictions the city has in place. 

The political climate has kept that project clear of the city, which has had the opposite effect of the coalition's intent of regulatory guidelines. 

ERCOT and AEP appear to be prioritizing the non-city property project for power allotments.

A data center next to Skybox/Emergent would be the third location (however not in city limits like Skybox).  

I followed up and learned that site is a potential data center for Cipher Digital.  

In a recent CNBC interview Cipher Digital's CEO noted their announced pipeline will tap the Texas electrical grid (i.e. not provide their own power).

Cipher Digital's CEO noted his company's land holdings in energy abundant West Texas.  

He did not mention his company's consideration of "private land a quarter mile east of" the proposed Skybox/Emergent site in Northeast San Angelo, just outside of city limits, but his corporate documents show a number of Texas projects.  

Cipher has a project known as Mikeska in Doole which is past Paint Rock.  I don't know if that's a quirk of landowner addresses.   Time will reveal if Mikeska is the site close to Skybox or not.

Cipher Digital has a Lancium (Stargate-Abilene) like history.  It began as a bitcoin miner taking advantage of stranded renewable energy.  They switched goldrushes from bitcoin to AI and demand is off the charts.  

At their recent meeting Tom Green County Commissioners tried to steer Beacon Data Centers to this part of town, however Joseph Shovlin did not seem receptive to a move from their current site at the intersection of Highway 2335 and Highway 67 given its access to Spring Creek for water use and discharging treated water.  He also saw proximity to the railroad as another plus.  

Shovlin showed his ignorance when he assumed the local community could absorb 1,200 new construction workers easily.  Beacon has no plans to provide temporary housing.   

One month ago Chamber of Commerce executive Michael Looney interviewed Tom Green County Judge Lane Carter about business growth in the area and specifically addressed data centers.  They addressed the issue of power/electricity needed by data centers.  Judge Carter cited solar and wind power, as well as abundant natural gas.

While the state rolls out the red carpet to power hungry and water usurping data centers, it turned our residential solar power system with battery backup into a nonperformer.  

At a time when we should be getting top dollar for the power generated Reliant is literally giving us nickels when before they gave dimes.  Texas rates went up 7%.  Reliant cut what they pay us in half (50%).

Cipher will also use water, I imagine from the City of San Angelo given their proximity.

Data center water usage (Beacon) - 400 acre feet per year.   Over 3 data centers that's 1,200 acre feet 

Water usage for 3,600 construction workers (1,200 per data center) - 730 acre feet per year

The running total is 2,000 new acre feet of water.  Beacon's Dove Creek Technology Center promised not to drill wells and impact groundwater.  Beacon's Westline Energy & Infrastructure will use groundwater for facility use.  Water will be needed for the power generation side (not factored into the water projections above).  

The Cipher Digital CEO interview is below for those who wish to view it.  Pay attention to what he says about Tier I vs Tier III sites:

Is anybody fighting mad?  To be clear I am speaking about the non-violent kind of standing up.  From my perspective the rules keep changing and not in the little guys favor.

AI Data Centers/Power Plants are flocking to Texas because of tax breaks in the Big Beautiful Bill and the chance to bypass state sales tax for extremely large capital outlays.  These incentives were set up by federal and state leaders, not local officials.  

San Angelo had a West Texas Utilities power plant on Lake Nasworthy and it discharged its cooling water into "Hot Water Slough."  Now such facilities will be located within the data center complex.

Our federal elected officials need to hear from constituents.  So do our state elected officials.  Those of us who lived through the Shale Boom know exactly what is coming.  Abilene is showing us that very thing at the moment.

Violence is never a solution.  Make your position clear to your representatives,  Thank heaven our local officials listen.  What is happening in many cases is beyond their control.

Federal and state officials clearly want to change our way of life.  Ask them to strike some kind of balance, because currently none exists.  

Update 6-6-26:  Cipher Digital has a major stockholder V3 Holdings, a Singapore investment firm.  V3 owns 15% of Cipher's stock.

Update 6-7-26:  Cipher refers to its San Angelo project as Colchis:

Cipher also formed a joint venture in West Texas to develop a new 1-gigawatt site called “Colchis.” Cipher will finance most of the project and expects to retain 95% ownership. The site features a 1-gigawatt Direct Connect Agreement with American Electric Power to construct a dual interconnection facility, scheduled for energization in 2028. The 620-acre site is next to an existing substation and intended for high-performance computing data center use.

It's a 1 GW data center.

Cipher has information about its Colchis project in its 2025 Annual Report and other SEC filings.

Beacon Plans to Take Ground Water

Tom Green County Commissioners Court heard from two people yesterday regarding the proposed Beacon Data Center in Dove Creek.  Local attorney and Owner/Contributing Editor for The Concho Observer Jon Mark Hogg spoke on behalf of Beacon and introduced Vice President and co-founder Joseph Shovlin.  

The project changed names since the public meeting in Dove Creek.  It's now Westline Energy & Infrastructure.

Shovlin talked about water but actually went back on his prior promise to not drill wells and only use surface water.  In April he said "we are not going to take your well water."  It's now the source for daily facility needs with their "Potable Water:  On Site Well."

This change calls into question Beacon's standards of leadership.  Early promise made, early promise broken.

This leads us to our final slide, the disclaimer.

Everything is preliminary, until it isn't.

The promise was the project would not take ground water.  Gone.  The promise is the project won't take grid power but will connect their power generation to the grid to supply power when needed.  Subject to disclaimer.

I hope they get the 5 cents per kilowatt hour that Reliant pays for household solar/battery power generation, but that would break their hurdle rate and they wouldn't be able to flip the project in five years.

Two local media sites, San Angelo Live and The Concho Observer, have key people/owners "all in" for data centers.  They support both political teams, Joe Hyde - Red Team and Jon Mark Hogg - Blue Team.

The Concho Observer is a publication of Hogg Media LLC, which is solely responsible for its content.

The picture is becoming clearer in terms of the players, but not clearer in terms of actual project details.  

The TechGods are coming....

City May Have Use for Former Dump Site: Indoor Sports!

San Angelo City Council will hear a presentation on developing a sports center on a former city owned "unauthorized" dump site.  

The Development Corporation purchased the land from the city in 2017.  

In 2018 the Development Corporation handed back the land to the City under recommendation of Assistant City Manager Michael Dane (now retired).  

The City approved the sale of the land to E&B Bryant Properties LLC for $1 million in 2022.  However, that did not go through according to the Tom Green County Appraisal District.

A number of assumptions seem to be a stretch, like the $1 million annual naming rights/philanthropy projection.  Also, the $125 per night hotel room will be nonexistent if our West Texas data center explosion imitates the shale boom when San Angelo had rooms for New York City prices.  

The City is changing as big money has "found us."  Those were the words of Chamber Executive Michael Looney.  He recently told the City's Development Corporation that four data centers are interested.  The public is aware of two, Skybox/Emergent and Beacon Data Centers.  The other two remain unnamed.

The sports facility may fulfill multiple aims by getting rid of that environment albatross and serving as a lure for Skybox/Emergent.  If we get the data center, we can provide you more sports options.  

How does that fit with Skybox will bring down your taxes?  We shall see.

Update 6-4-26:  The City of San Angelo explained why this item was not covered in their recent council meeting:

Due to a scheduling conflict with the presenter, Item 6a, a presentation and discussion of a feasibility study for an indoor sports complex on the June 2 City Council agenda, has been rescheduled for the July 7, 2026, City Council meeting.

AI Finks Seemingly Everywhere

WIRED ran a story on the FBI and other federal agencies concerned about citizen resistance to data centers locating in their community.  

According to documents obtained by WIRED through public records requests, more than 1,000 pages of previously unpublished reports from Department of Homeland Security, the FBI, and fusion centers show agencies increasingly tracking what they describe as anti-technology threats.

One report from the New York Intelligence and Counterterrorism Bureau warned that AI adoption could spark major unrest within the next five years and result in "anti-tech violent extremist activity."

This follows BlackRock's Larry Fink expressing concern that citizens would use drones to attack data centers.  Something very strange is going on given how quickly this language has accelerated.   

Fink landed in Texas this week and appeared with Governor Greg Abbott.  Larry went on to suggest public pension funds, retirement and savings accounts finance hyperscale data centers. 

 

Expressing one's opinion, asking government to be open and accountable, to balance the resource needs of citizens with economic development and seeking to minimize the transfer of public dollars to extremely wealthy corporations/corporate executives sounds like a basic right.  

Have those rights also been pledged to TechGods and the Lords of Capital by our elected officials?

I never thought I needed to shield my savings and retirement accounts from voracious AI data centers.  Thank God, Larry Fink warned me.  

Update 5-28-26:  My wise friend noted:

The accumulated savings of the people have been harnessed and softly commandeered through the narrative of investment for the likes of Larry Fink and his private equity/venture capital brethren as they funnel those flows into their mandates and increased wealth.  I wonder how many people would pay attention if their private marks (asset valuations) were revealed and the Federal Reserve finally just let the market clear. 

Larry began his career with a wipeout, It would be poetic justice if he ended his career the same way.

Government of, by and for the TechGods. the Lords of Capital and their political functionaries.  Finks everywhere.

The new executive producer of 60 Minutes is a documentarian and tech journalist.  

Tom Green County Targeted, San Angelo Partnering

Three data centers have targeted Tom Green County for possible sites.  Beacon Data Centers is the only one to identify itself.  They hope to build a giant data center in Dove Creek.  Residents told them to go away.

The City of San Angelo has been far more accommodating, working a land deal/annexing the area (March 2005), changing the zoning to allow data centers (January 2026) and approving zoning regulations relative to data center development (May 2026).  Developer Skybox/Emergent promotes the project as "built for speed" and having "exceptional municipal support."  

Data Centers are needed for AI and are being brought to us by the same people that created addictive and harmful social media and other predatory apps.  

Our leaders want the public to trust the developer any potential AI occupant.  

No thank you.  Developers are backed by big money intent on making bigger money.  Promises mean nothing.  The project is intended to make bank for its private equity underwriter (PEU) sponsor.  If so, it will be flipped in a few years and the people who brought the project to our area will be gone.

It could middle along, in which case the developer has to hold onto to the project, tweaking it for regular cash siphoning.  

The project could fail miserably and its keys be handed back to creditors.  If creditors don't want it, it becomes the city's problem as an abandoned piece of property with lots of toxic heavy metal equipment and tainted cooling water.

Tom Green County residents need a government champion, whether it be local, regional or state, to level the imbalance of power and advantage.  Texas, like most states, is set up to encourage such development via layers of tax breaks, fast tracking permits and even direct subsidy.

San Angelo residents need brakes to stop the oncoming train so its engine defects can be examined and fail safe's installed that actually protect residents.  There needs to be significant monetary penalties for failed promises and actual community harm.

The developer would say "we are just the building."  That building will use the energy of 750,000 homes and house unreliable, even dangerous AI. 

I speak for many when I say our area does not need or want hyper-scale data centers with their voracious power and water needs, their inflation boosting impact on goods and housing and their profit obsessed PEU owners/funders.  

Someone owes us a square deal, not one where we pay and pay and pay, both in money and loss of quality of life.  

Update:  Lake Tahoe communities are facing the prospect of no electricity due to a supplier redirecting its power to data centers.

The data center boom is rapidly sucking Nevada’s power grid dry, with an estimated 22 percent of the state’s total electricity generation capacity going toward the behemoth computing centers in 2024.

Texas, are you listening to the rapidly sucking sound to our west? 

Update 5-26-26:  Business Insider ran a story on students booing graduation speakers over the mention of AI:

....the perception of AI among the public is low. A Pew Research Center study found that about half of Americans felt the increased prevalence of AI in their daily lives made them feel "more concerned than excited." Many Americans across the country, meanwhile, are resisting new data centers in their communities, which are essential to powering AI products like chatbots.

Oh, and the cost of compute will far exceed the cost of human employees according to NVIDIA's CEO..