(Sept 24): Oracle Corp is moving to shield itself from racking up expenses on a massive data centre being built in New Mexico, adding a fresh wrinkle to a project beset by opposition and regulatory setbacks.
The technology giant sent the project’s developer, a unit of Blue Owl Capital Inc, a notice citing force majeure, according to people familiar with the situation. Rather than trying to walk away as the site’s main tenant, Oracle is attempting to put off payments should the data centre dubbed Project Jupiter get derailed and fail to come online in 2028 as planned, the people said, asking not to be identified discussing private matters.
Companies typically invoke force majeure to free themselves from contractual obligations when problems arise beyond their control. In this case, Oracle is seeking to assert its contractual position if the build out is delayed. Still, it’s not certain that such a maneuver would free Oracle from its previously agreed financial obligations.
“Project Jupiter remains on our planned schedule,” a spokesperson for Oracle said without commenting on the notice. “We are fully committed to New Mexico and confident in our path forward.”
A representative for Blue Owl, which owns the data-centre developer Stack Infrastructure, declined to comment.
The massive project in southern New Mexico is a major part of the Stargate AI infrastructure build-out that US President Donald Trump unveiled alongside leaders of Oracle, OpenAI and SoftBank Group Corp, serving as the marquee announcement in a series of US spending commitments that he touted in the early days of his second term. At the time, Trump called it a “tremendous investment” at a scale that “nobody’s really ever seen.”
Almost two years later, the campus designed to handle 2.45 gigawatts — enough electricity to power roughly 1.8 million homes at any given moment — has hit serious setbacks including the denial of a permit key to its plans for energy resources. It’s becoming a symbol of the growing backlash against the broader AI data centre boom and a political flashpoint ahead of the US mid-term elections that threatens to turn races into referendums over the build-out.
Even if the force majeure notice is intended as a precautionary step to win some wiggle room, it risks alarming lenders backing the project. The debt tied to the development is already trading at stressed levels, below 90 cents on the dollar, according to a person with knowledge of the matter.
A group of about 20 banks provided an US$18 billion (RM73.4 billion) loan to help fund the construction of the data centre campus, one of several mega-debt deals that have helped bankroll the AI infrastructure boom.
The notice also stands to raise questions yet again about the resilience of data centre leases. Contracts often include a clause allowing customers to back out if service doesn’t begin as scheduled. Earlier this year, Alphabet Inc’s Google agreed to pay Elon Musk’s SpaceX for computing power through mid-2029, for example, but reserved the right to terminate if it didn’t gain access by a certain date.
Force majeure provisions are relatively common in the energy and commodities world when events such as bad weather and geopolitical conflicts disrupt supplies, leaving companies unable to fulfill their contracts. The clauses are becoming more common in data centre developments as well, according to a recent client alert from Quinn Emanuel Urquhart & Sullivan LLP.
“In AI data centre projects, force majeure is no longer a back-end boilerplate provision,” the June alert said. “It is a core litigation and risk-allocation tool that can determine whether a delay remains isolated — or cascades through the project’s construction, customer, power, insurance, and financing documents.”
OpenAI signed a US$400 billion deal with Oracle and SoftBank last year to support the development of five US data centres including the New Mexico site. Stack Infrastructure, a portfolio company of Blue Owl, is developing the facility, while Blue Owl itself has committed to providing equity.
A key natural gas pipeline project developed by Energy Transfer LP that was supposed to begin service this month and supply fuel to Project Jupiter was instead delayed by nearly six months to Feb 1, 2027, following repeated permit denials from the New Mexico State Land Office to approve a proposed route for the line. Project Jupiter is designed to be powered by gas-powered fuel cells from Bloom Energy Corp.
Oracle, for its part, has launched a charm offensive in New Mexico to counter the opposition. It remains unclear whether the company will win over the project’s skeptics.
Before Project Jupiter was revealed in full, the developers worked with local officials on an incentive plan and a strategy for how to roll out information to the public, according to documents previously reviewed by Bloomberg. Locals only learned the venture was tied to Oracle and OpenAI after it was approved.
Uploaded by Magessan Varatharaja