El Salvador - LaGEO needs cash to build out geothermal mining infrastructure
Blockstream wants to mine at LaGEO's Berlín facility. It needs more wells.
Part of El Salvador president Nayib Bukele’s plan to convert El Salvador into a Bitcoin jurisdiction is to mine Bitcoin using geothermal energy. That involves a few challenges.
One of the main things Bukele needs to do is to build out LaGEO’s capacity to produce electricity at Berlín, the 109MW powerplant based in Usulutan department. LaGEO sits within the umbrella organization CEL, El Salvador’s state-owned energy company.
What we hear from sources in El Salvador close to CEL is that the company lacks the cash needed to build out wells and add capacity. Capacity limitations mean a significant bottleneck for Blockstream if it wants to mine Bitcoin from geothermal energy. In mid-2021, a handful of mining companies looked at the Berlín facility and walked away because of high prices and capacity issues. That left Blockstream as the last man standing.
There are two ways CEL is going to try to raise cash. The first is obvious: Blockstream’s Mow is brokering a Bitcoin-backed, USD-denominated bond issuance with President Bukele. The plan is to capitalize LaGEO with $500mn - if the appetite is really there for the bond.
But CEO of CEL Daniel Alvarez has a plan B option. Alvarez and Bukele are lobbying the Abu Dhabi-based renewable energy association IRENA for a slice of its $1bn facility. IRENA said in January that it wanted to prioritize El Salvador’s geothermal energy policy.
If the bond issuance falls short, Alvarez and CEL might be able to lean on IRENA. That will mean IRENA has to implicitly back Bukele’s Bitcoin policy and accommodate a stance that’s not entirely friendly to the IMF. If IRENA balks at the investment, it could leave La GEO and Blockstream without the capital they need to mine BTC from geothermal energy.