Microsoft Signs 20-Year Power Deal With Chevron Subsidiary for Texas Data Center Campus

A new long-term energy agreement underscores how aggressively data center operators are locking in electricity supply as artificial intelligence workloads strain power grids.

In June, Energy Forge One, a wholly owned subsidiary of oil major Chevron, signed a 20-year power purchase agreement with Microsoft to supply electricity to a data center campus located in Reeves County, Texas. A power purchase agreement is a long-term contract in which a buyer commits to purchase electricity at pre-agreed terms, giving developers revenue certainty to finance large-scale projects.

The development, known as Project Kilby, is designed to reach roughly 2.67 gigawatts of capacity — enough, according to Bloomberg, to power more than 530,000 Texas homes. That scale places it among the larger power deals tied to data center construction in the United States, where cloud providers have struggled to secure sufficient grid capacity to match their expansion plans.

Why an oil company is powering data centers

The deal highlights a notable convergence: traditional energy companies are leveraging their capital and development expertise to serve the electricity-hungry data center market, while hyperscalers such as Microsoft are turning to independent power producers to guarantee supply. Microsoft, one of the largest cloud infrastructure operators in the world, has been racing to add computing capacity for AI services, making power procurement a strategic priority.

For Microsoft, the agreement provides a two-decade hedge on energy costs for the campus. For Chevron, it represents a diversification of its energy portfolio beyond oil and gas production into electricity generation.

Market context

Microsoft shares recently traded at $491.65, down 0.32% from the previous close of $493.25, giving the company a market capitalization of approximately $3.71 trillion. The company remains one of the most valuable components of the technology sector, classified in the Software – Infrastructure industry.

The transaction also reflects broader pressure on the power sector. Data center demand growth has outpaced additions to grid capacity in several regions, pushing technology companies to sign long-duration contracts with power developers, including projects co-located near generation sources in energy-rich states like Texas.

The agreement was highlighted in a recent analysis of Dow Jones Industrial Average components and their dividend profiles, where the deal was cited as evidence that Chevron’s energy business extends beyond commodity price cycles.

What to watch

• Construction and capacity milestones for Project Kilby in Reeves County, Texas, as the project works toward its roughly 2.67 GW target.
• Microsoft’s upcoming earnings reports, where capital expenditure and data center capacity guidance will signal the pace of its AI infrastructure buildout.
• Additional power purchase agreements between hyperscalers and energy companies as data center electricity demand continues to grow.

Source: original release