Applied Digital Signs a 1,200 MW Gas Power Deal With a Company Its CEO Runs

Applied Digital, the Dallas company that develops, owns and leases large data centers, reported results for its fiscal first quarter, the three months ended August 31, 2026, in a Form 8-K with a press release on October 7, and filed its Form 10-Q the same day. The release reports revenue of $341.9 million, up 322 percent from a year earlier, and a net loss from continuing operations attributable to common stockholders of $221.0 million. The company also reports a figure real estate readers will recognize, net operating income, at $58.8 million on $65.8 million of base rent, an 89 percent margin by its own non-GAAP definition. Its data center leasing segment booked $262.6 million of revenue, of which $183.5 million was tenant fit-out services, which computes to about 70 percent. The company says it holds leases for approximately 1.41 gigawatts of critical IT load across five campuses in North Dakota, Louisiana and Alabama, representing about $36 billion of contracted revenue over the base terms. That is a company figure. On October 1, it says, the second 75 megawatt phase of the second building at Polaris Forge 1 in Ellendale, North Dakota was delivered, bringing live capacity there to 250 megawatts. It ended August with $3.7 billion of cash and restricted cash and $6.4 billion of debt.

The item this brief is about sits near the back of the 10-Q, in Item 5. On October 4, 2026, Applied Digital entered into a power purchase agreement and a related credit support agreement with Base Electron for capacity and energy from an approximately 1,200 megawatt natural gas-fired plant that Base Electron is to develop in Center, North Dakota. The filing says the plant is intended to provide dedicated generation for the Polaris Forge 3 campus. The agreement has a 15-year delivery term, provides for fixed monthly payments based on target contract capacity, and may be terminated by Base Electron if financial close for the plant has not occurred by March 31, 2027. The filing then says who Base Electron is. Applied Digital owned approximately 10 percent of it as of October 4. It is “owned and managed by certain officers and directors of the Company, including Messrs. Cummins and Zhang and Dr. Nottenburg, acting in their individual capacities, as well as numerous third parties,” and Mr. Cummins and Mr. Zhang serve as its chief executive officer and its president and secretary. Wes Cummins is Applied Digital’s chairman and chief executive, Jason Zhang is its president, and Richard Nottenburg is a director. The filing says the board approved both agreements after review and recommendation by its Base Electron Related Party Transaction Committee.

Start with size. The 10-Q describes Polaris Forge 3 as two buildings under construction with 300 megawatts of capacity in total, with initial delivery expected in the second half of 2027 and full capacity in the second half of 2028. The plant is about 1,200 megawatts, which computes to four times the campus as leased. The financial statement note describes the power as for the “Polaris Forge 3 campus expansion,” and the release says Base Electron’s generation “could add multiple gigawatts of new power in the Dakotas over time.” So the power is sized for load that is not yet under lease. The payment term matters for the same reason. Fixed monthly payments based on target contract capacity read like an obligation tied to the size of the plant, not to how much power the tenant draws. That is PSV’s reading of one sentence. The agreement itself is not among the exhibits to this 10-Q, and the filing gives no price, no start date for deliveries and no description of what the credit support agreement commits Applied Digital to.

Then read the related party notes. Applied Digital carries its 10 percent stake at $2.0 million. It also lends to Base Electron under a demand note with a limit of $100.0 million, with $58.5 million of principal outstanding at August 31. The company’s proxy statement, filed September 25, says that limit was raised to $100.0 million on May 29, 2026. The 10-Q classifies Base Electron as a variable interest entity “because it does not have sufficient equity at risk to finance its activities without additional subordinated financial support,” and says Applied Digital does not consolidate it because it does not direct the activities that most affect its performance. Put plainly, the company that is to build a 1,200 megawatt plant is thinly capitalized, borrows from its customer, and is run by its customer’s chief executive. For scale, Applied Digital’s own financing is not cheap: it closed $1.59 billion of 7.000 percent senior secured notes due 2031 in June to fund a third building at Polaris Forge 1, which computes to about $111 million of interest a year before amortization. It recorded $77.4 million of interest expense in the quarter and capitalized another $35.7 million, against the $58.8 million of net operating income. Three customers made up 56, 21 and 11 percent of revenue, which computes to 88 percent.

The work is one file per campus whose power comes from a generator the landlord or developer is tied to. The inputs are public or in the deal room: the landlord’s 10-Q and proxy statement, the power purchase agreement and any credit support agreement if they are filed or provided, the power delivery and remedy clauses of the lease, and the state siting, air permit and gas supply records for the plant. The output is one page that answers six questions with a page citation for each. Who owns the generator, and who manages it. Who lends to it, and how much. What the buyer owes each month, and whether that payment depends on load. What has to happen before the plant is financed, and by what date. What the lease says if the dedicated power is late, including whether grid service covers the gap. And which body approved the related party terms.

The reviewer is the development lead or asset manager, with energy counsel on the contract columns. The approval gate is simple to state: no underwriting, loan sizing or lease proposal counts affiliate generation as delivered capacity until financial close on the plant is documented and counsel has read the power agreement and the credit support agreement. An assistant is useful for the volume. This 10-Q runs past 50 pages, the Base Electron facts sit in four separate places, and they do not quite match each other. Finding every mention, lining up the figures and flagging the differences is work to hand off. Deciding what a difference means is not. PSV ran no model on these filings, tested no product, and promises no cost, schedule or financing outcome.