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Chevron Strikes 20-Year Power Deal to Provide Electricity to Microsoft Data Center in West Texas

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Chevron Strikes 20-Year Power Deal to Provide Electricity to Microsoft Data Center in West Texas

Chevron (CVX) has agreed to build a power plant in West Texas to supply electricity to a data center operated by technology giant Microsoft (MSFT), as part of a 20-year power purchase deal.

Chevron's subsidiary, Energy Forge One, entered into the agreement with Microsoft for the development of the project, known as Kilby, the oil giant said Monday. The companies didn't disclose the financial terms of the deal.

The facility is expected to deliver about 2.67 gigawatts of capacity, with a majority of the generation to come from large turbines and related electrical infrastructure from GE Vernova (GEV), according to Chevron. Caterpillar (CAT) unit Solar Turbines will provide additional capacity, the company said.

Chevron's shares dipped 0.2% in Monday trade, while Microsoft edged down 0.9%.

"Chevron is uniquely positioned to deliver power to customers with certainty, speed and at a competitive cost, leveraging Permian natural gas and our proven execution capabilities," said Jeff Gustavson, Chevron's president of new energies. "This project links Chevron's traditional strengths to emerging demand, creating differentiated value for our shareholders and the communities where we operate."

Chevron said it's aiming for a final investment decision by the end of the year, with first power delivery expected in 2028. The project is anticipated to deliver mid-teen returns and generate diversified cash flow independent of oil and gas price cycles.

"The rapid growth we're experiencing in AI and cloud, driven by customer demand, requires energy infrastructure that can scale quickly and reliably," according to Noelle Walsh, Microsoft's president of cloud operations and innovation. "Our agreement with Chevron helps ensure we'll have dedicated, large-scale power to support the evolution and reliability of advanced compute."

The project is estimated to generate more than $10 billion in state and local tax revenue, create nearly 2,000 jobs and boost wider economic growth, according to Chevron.

Earlier this month, Amazon.com (AMZN) agreed to a multibillion-dollar deal with specialty glass maker Corning (GLW) to secure optical fiber, cable, and connectivity components for its US data center infrastructure.

Price: $173.33, Change: $-0.30, Percent Change: -0.17%

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