LIMESTONE, Tenn. (WJHL) — Bitcoin mining company GRIID, which operates a facility in Limestone that became the subject of a lawsuit, has agreed to merge with a larger and more profitable Bitcoin mining company, CleanSpark.
The deal would breathe new life into GRIID, which has lost millions of dollars in the past couple years, and could increase the odds that it would invest in a replacement Bitcoin mine in Johnson City. A lawsuit settlement requires the 25-megawatt (MW) Limestone mine, which opened in 2021, to close by March 2026.
The Las Vegas-based company and GRIID announced the news on June 27. GRIID, which went public in January but was continuing to lose millions of dollars, will have about $55 million of its current debt go under CleanSpark, which has been aggressively growing its Bitcoin mining portfolio this year. The deal, unanimously approved by both company’s boards, is expected to close before the end of September.
GRIID is the parent company of Red Dog Technologies, which operates a Bitcoin mine near BrightRidge’s Bailey Bridge Road electric substation in Limestone’s New Salem community. BrightRidge said in 2021 that Red Dog would be its largest power consumer.
A Bitcoin mine is actually a collection of high-powered computers that perform complex computations to “search” for new Bitcoins, which each have a unique digital identification. Noise from the fans used to cool the computers in Limestone prompted a public outcry, ultimately resulting in Washington County suing Red Dog and BrightRidge.
A settlement reached last fall requires Red Dog to dismantle the Limestone mine by 2026, but GRIID CEO Trey Kelly told Washington County commissioners the company hoped to move even earlier than that if they could find a new location and construct a new facility.
But that could have been difficult to pull off before the announcement of the CleanSpark merger. GRIID’s financial statements show it lost $18.6 million in 2023 after losing $61.6 million in 2022. The company lost $4 million on operations in the first quarter of 2024 and $6.5 million total, and listed $75 million in debt and $21.6 million in notes payable as of March 31.
CleanSpark, on the other hand, listed net income of $127 million the first quarter of 2024, with almost no debt and more than $650 million in cash and Bitcoin on hand.
Judging by the news release announcing the proposed merger, CleanSpark wants to grow in Tennessee, where the Limestone facility is currently GRIID’s largest out of 55MW of current capacity. GRIID also reported 80MW of announced expansion plans in Tennessee.
“This acquisition would give us a clear and steady path over the next three years to accomplish in Tennessee what we proudly achieved in Georgia over the past three years,” CleanSpark CEO Zach Bradford said in the release. “That achievement was to build out over 400 MW of infrastructure backed by valuable, long-term power contracts.”
He said CleanSpark should be able to get the GRIID portfolio in Tennessee over 100MW by the end of the year.
Next stop Johnson City?
The GRIID-Washington County settlement costs GRIID $100 a day as long as it operates in its current location. The company agreed to shut down the Limestone site once it starts up elsewhere in Washington County, “including within Johnson City limits…”
BrightRidge purchased 7 acres in the Buffalo Mountain Industrial Park on Jan. 31. Minutes from a BrightRidge board meeting stated the property “is located 1,100 feet from a TVA 161 (kilovolt) transmission line and an adjacent BrightRidge 69kV transmission line.”
BrightRidge told News Channel 11 in a statement it bought the land “for future uses, including infrastructure to enhance system security, reliability and quality. Moreover, the acquisition secures an industrially zoned parcel that is uniquely located in close proximity to both TVA and BrightRidge transmission lines.”
The utility wouldn’t comment on the potential for relocating the Limestone Bitcoin mine.
GRIID CEO Trey Kelly replied to an email query and said the pending acquisition doesn’t change a commitment to the settlement’s terms.
“We are exploring options to relocate the Limestone facility as agreed in the settlement,” Kelly wrote. “It is premature to identify any specific location at this time. This commitment remains unchanged as we work toward closing the merger.”
The recently purchased property, which BrightRidge paid $525,000 for, lies in an I-2 (heavy industrial) zoning designation, Johnson City Planning and Development Services Director Will Righter told News Channel 11.
He said the city has been working on a “text amendment” to its zoning ordinance that would place some logical parameters around Bitcoin mines and other “blockchain data centers.”
Righter said the city is seeking to figure out where “the best fit for one of these processing centers would be” and expects to add blockchain data centers as a permitted use in the I-2 zone.
“These data centers were not thought of when the zoning code was written,” Righter said. “They’re showing up across the country and obviously, with the issues that happened in Washington County, we want to make sure that we have it clearly stated, where these things can be permitted in the city limits.”
Righter said when a zoning code “is silent on something,” a local government can’t just deny a use. “You’re tasked with finding a place that would in the zoning code best accommodate that use.”
He said the city has decided I-2 is the most appropriate zone, and added that any Bitcoin mine would be subject to the city’s noise ordinance and also, per the code on manufacturing processes, that it not cause “obnoxious noise.”
The Buffalo Mountain property is less than a half-mile from the Garland Acres subdivision off of South Roan Street and from a large mobile home park. Johnson City’s noise ordinance sets the maximum decibel levels in residential districts at 55 decibels between 11 p.m. and 7 a.m. and 75 decibels at other times.
GRIID representatives told Washington County in 2022 as an earlier settlement was being discussed that an envisioned replacement facility would use a more advanced cooling system that created significantly less noise than the fan-cooled one in Limestone.
