Core Scientific Bankruptcy Judge Approves Transfer of Over $20M of Equipment to Its Exclusive Energy Negotiator
Core Scientific had stopped paying Priority Power Management in May 2022.
The judge in Core Scientific's (CORZ) bankruptcy case approved a settlement with the bitcoin miner's exclusive energy contract negotiator under which Core Scientific will transfer more than $20 million worth of electrical equipment to the supplier.
The dispute relates to two facilities in west Texas that were supposed to cumulatively bring 1 gigawatt (GW) of power capacity to Core Scientific's portfolio of assets. Starting in the summer of 2021, Priority Power Management was hired as the miner's "exclusive energy manager and consultant," with responsibilities including negotiating power contracts and the build out of the two west Texas sites, according to a declaration filed with the court from Michael Bros, the miner's senior vice president of capital markets and acquisitions.
However, as of May 2022, after "it became clear that the [two west Texas] facilities would not receive the anticipated power load," Core Scientific stopped making various payments to Priority Power Management, Bros said. Neither firm immediately replied to CoinDesk's request for comment as to why the power was not delivered.
The miner also halted debt payments in October 2022 as it was running low on cash. In December, it filed for Chapter 11 bankruptcy protection.
Due to the work it had performed for Core Scientific up to the bankruptcy filing, Priority Power Management claimed it was owed about $30 million in the proceedings.
Technically, the deal will see Priority Power Management "get an allowed secured claim for $20.8 million, which is going to be deemed paid in full by the transfer of all the debtors' interest in the equipment," said federal Judge David Jones of the Southern District of Texas at a Monday hearing. Secured claims take priority over other types of claims in a bankruptcy.
The equipment in question actually cost around $23 million, and about $17 million of it is already in Priority Power Management's possession.
Under the deal, the consulting firm will loosen its exclusivity in procuring power agreements for Core Scientific, but keep $514,000 it earned by power curtailment for the miner. Core Scientific will also reimburse $85,000 of legal and out-of-pocket expenses to the consulting firm.
The two facilities appear to be up for sale, and Core Scientific "will introduce" Priority Power Management to any acquirer so that they can negotiate a similar deal, according to the Bros declaration.
A spokesperson for the miner said Monday that "the Priority Power Management settlement does not affect that [sale] process."
Core Scientific had previously said it would sell two facilities that are currently under development with up to 1 GW of power capacity as part of the bankruptcy proceedings.
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