Long Term Power Access And AI Data Center Leases Will Drive A Transformational Future

Catalysts

About Keel Infrastructure

Keel Infrastructure develops and owns high power, North American HPC and AI data center sites for hyperscalers and neocloud customers.

What are the underlying business or industry changes driving this perspective?

• Secured access to approximately 2.2 gigawatts of power and land across high demand, high barrier markets like Pennsylvania, Washington and Quebec positions Keel to benefit as AI data center developers compete for scarce energy capacity, which could support long term revenue visibility as leases are signed.
• Customer demand is already evident, with all three key sites (Panther Creek, Sharon and Moses Lake) under active NDA discussions and inbound interest increasing after milestones like zoning at Panther Creek, which may support lease terms that are favorable for future earnings quality.
• Permitting, architecture and engineering, and commercialization are advancing in parallel. Management expects permits and lease execution milestones to be achievable in the near term, which could move the business from being valued on power alone to being valued on contracted cash flows and net margins.
• Management has pivoted fully away from Bitcoin mining toward a pure infrastructure developer and owner model, backed by project partners such as T5, Turner Construction and Vertiv. This aligns capital and operational focus with long duration, contract based HPC and AI lease revenue.
• Keel reports liquidity of US$520 million and no need to raise additional capital to reach leases at Panther Creek, Sharon and Moses Lake. This gives the company flexibility to pursue higher return projects and potentially improve future earnings and free cash flow profiles.
• Existing power plants at Panther Creek and Scrubgrass already participate in PJM capacity auctions, and Scrubgrass has potential natural gas generation expansion. This may create incremental monetization opportunities for power assets alongside future data center lease revenue.

Assumptions

How have these above catalysts been quantified?

• This narrative explores a more optimistic perspective on Keel Infrastructure compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Keel Infrastructure's revenue will remain fairly flat over the next 3 years.
• The bullish analysts are not forecasting that Keel Infrastructure will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Keel Infrastructure's profit margin will increase from -90.9% to the average US Software industry of 11.5% in 3 years.
• If Keel Infrastructure's profit margin were to converge on the industry average, you could expect earnings to reach $26.7 million (and earnings per share of $0.04) by about May 2029, up from -$208.5 million today.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 254.0x on those 2029 earnings, up from -9.4x today. This future PE is greater than the current PE for the US Software industry at 31.6x.
• The bullish analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.48%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Keel is still in the middle of a multi year transformation away from Bitcoin mining into HPC and AI infrastructure, so any delay or execution misstep in permitting, construction or leasing could extend the pre revenue period for new data centers and keep group revenue more dependent on a legacy business that management is already winding down, which would weigh on earnings and cash generation.
• The investment case heavily depends on securing long term, investment grade leases at Panther Creek, Sharon and Moses Lake, and management has chosen to wait for notice to proceed level permitting before signing. A shift in tenant bargaining power, slower customer decision cycles or weaker lease terms than management is targeting could limit future rental income and pressure net margins.
• The pivot away from GPU as a service toward a pure co location model reduces capital intensity, but it also concentrates exposure on rental pricing and utilization. If AI and HPC demand for third party capacity were to soften or tenants decided to build in house instead, occupancy and pricing at Keel sites could fall short of expectations, affecting revenue and earnings quality.
• Management plans to exit Bitcoin mining in a disciplined way, yet current hash rate is already being scaled back and mining operations are described as marginal. A prolonged period before HPC and AI leases begin to generate cash could create a gap where the company has lower operating inflows relative to development spending, which would increase pressure on liquidity and could dilute future net margins if new capital is raised.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Keel Infrastructure is $7.0, which represents up to two standard deviations above the consensus price target of $4.78. This valuation is based on what can be assumed as the expectations of Keel Infrastructure's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $7.0, and the most bearish reporting a price target of just $3.0.
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2029, revenues will be $233.2 million, earnings will come to $26.7 million, and it would be trading on a PE ratio of 254.0x, assuming you use a discount rate of 9.5%.
• Given the current share price of $3.25, the analyst price target of $7.0 is 53.6% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.