(Bloomberg) -- Data center company Crusoe Energy Systems Inc. is sounding out investor interest in a potential debt deal that would help grow the firm’s Bitcoin mining business, according to people with knowledge of the mater.
Crusoe is seeking a $100 million to $125 million loan, said the people, who asked not to be identified because talks are private. The potential financing would be backed by Crusoe’s bitcoin mining and generation equipment, and deal discussions are in the early stages and could change, the people added.
Crusoe, which is working with investment bank Ducera Partners LLC on the capital raising process, aims to ink a deal by year-end to take advantage of cryptocurrency’s recent momentum, the people said.
A representative for Crusoe didn’t immediately respond to requests for comment. A representative for Ducera didn’t immediately provide comment.
Denver-based Crusoe works with oil and gas companies to capture harmful emissions tied to energy production, and converts those byproducts into electricity to power data centers and crypto-mining operations.
The company’s projects are designed to alleviate flaring, a long-standing issue in the shale industry. Oil producers deliberately burn off unwanted natural gas -- a byproduct of oil drilling -- because it’s often more cost-effective than selling it.
Regulators and investors are increasingly scrutinizing such practice, as it releases carbon dioxide and causes air pollution. New Mexico’s oil regulator approved stricter rules in March that will end routine natural gas flaring, and BP Plc said it’s targeting zero routine flaring in its U.S. onshore operations by 2025.
Crusoe aims to make the combustion process cleaner by using natural gas that would otherwise be flared to power on-site generators and computing systems. The company, founded in 2018, counts Devon Energy Corp., Kraken Oil & Gas LLC and Enerplus Corp. as clients. Its operations span across Wyoming’s Powder River Basin, Colorado’s DJ Basin, and North Dakota and Montana’s Bakken oilfield.
In April, Crusoe received $128 million in equity financing led by Valor Equity Partners, along with a $40 million project financing facility. Venture capital firms including Bain Capital Ventures, Coinbase Ventures and Winklevoss Capital also participated in the round. The company said at the time that it planned to operate more than 100 data centers -- up from 40 -- in new and existing markets with flaring practices, as well as areas with excess wind or solar power.
While Crusoe’s potential debt deal has piqued the interest of certain private lenders, the financing cost could come in the double-digits, the people said. Most of the company’s revenue stems from Bitcoin, which is volatile and difficult to hedge, they added. Bitcoin prices have swung from around $9,000 to more than $63,000 in the past year.
Enthusiasm for the cryptocurrency has cooled since Bitcoin topped $63,000 in April. The change in sentiment comes amid a regulatory crackdown in China and criticism over crypto’s environmental impact. After months of slumping prices, Bitcoin surged close to $40,000 on Monday, buoyed by short-covering and speculation over Amazon.com Inc.’s involvement in the crypto industry.
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