Applied Digital seeks billions in power guarantees from prospective tenants
Oracle and Meta are among those asked for guarantees, Bloomberg reported, as utilities seek protection against the cost of failed projects.
Applied Digital is seeking guarantees worth billions of dollars from tenants including Oracle and Meta before agreeing to leases, Bloomberg reported, citing a person familiar with the matter. The guarantees would secure electricity for the developer’s data centers.
The company has also approached chipmakers Nvidia and AMD for guarantees, according to the report. The requirements vary by deal and generally cover connections to the electricity grid.
Bloomberg reported that Applied Digital has limited leasing to junk-rated neocloud providers such as CoreWeave to avoid additional utility requirements associated with lower-rated tenants. Chief executive Wes Cummins told Bloomberg the company favors a tenant mix of 70% investment-grade and 30% non-investment-grade. CoreWeave described its relationship with Applied Digital as strong; Meta offered no comment, while Oracle declined to comment.
Utilities are seeking to make major electricity users bear costs if projects fall through, rather than funding grid improvements and recovering the expense through rates. In Wisconsin, regulators require collateral from large customers with ratings below A-. Oracle said the requirement could mean more than US$7 billion for its Lighthouse campus. It challenged the regulator in court in June but withdrew the case in August.
A different arrangement in Indiana uses GenCo, a separate unit established by Nipsco parent NiSource, to have Amazon, Google and Microsoft pay for plants supplying them. Bloomberg reported that Nipsco has signed GenCo agreements totaling 5 gigawatts. NiSource estimates savings of about US$1.75 billion for existing customers.
