Oracle has guaranteed payouts to investors on a massive New Mexico data centre even if it fails to secure electrical power before the project is due to come online, according to people familiar with the matter.
The tech group has issued a force majeure notice related to the power supply to the project developer, a unit of Blue Owl Capital, after the site ran into permitting delays after rising local opposition.
But under the terms of the contract, Oracle is still liable to pay a “carry cost” in lieu of rent payments for up to three years if the project is not ready by the deadline for the first phase to start operating in the first half of 2027.
Construction is already under way at the 1,400-acre campus in Doña Ana County, but Oracle could be left paying for a site without electricity to run the facility if the power hook-up is not secured in time.
“The power delivery risk sits with Oracle, not the investors,” one of the people said.
The site, dubbed “Project Jupiter”, is at the centre of Oracle’s $300bn contract to provide computing power to OpenAI, the keystone of the software group’s ambitious strategy to become an AI data centre player.
The force majeure clause Oracle invoked is a common legal provision intended to release parties from their obligations if an uncontrollable event makes fulfilling the contract impossible.
Oracle may be able to put off rent payments to Blue Owl, but it still had to pay a fee that would cover the interest payments to debtholders in full as well as a certain level of equity return for Blue Owl funds that have invested billions of dollars in the project, the people said.
There was also disagreement about whether a force majeure clause can be triggered before a project’s scheduled completion date, a second person said. Bloomberg first reported on the force majeure notice on Thursday morning.
A consortium of more than 20 banks, led by BNP Paribas, Goldman Sachs, MUFG and SMBC, provided $18bn of construction debt for the project late last year.
However, efforts to offload the debt to a broader group of institutional investors stalled due to growing concerns around Oracle’s creditworthiness following an unprecedented borrowing spree, leaving the banks with more Oracle-linked project debt on their balance sheets than initially planned, the people said.
Loans tied to the project have been under strain and were quoted at under 90 cents on the dollar by banks, the FT previously reported. The four-year construction debt was priced at 2.5 percentage points above the Secured Overnight Financing Rate, with an optional two-year extension.
BNP Paribas, Goldman Sachs and SMBC declined to comment. MUFG did not respond to a request for comment.
Oracle said force majeure notices did not establish a project delay or change delivery expectations. “Project Jupiter remains on our planned schedule. We are committed to New Mexico and confident in our path forward,” the company said.
A Blue Owl spokesperson said the notice “does not change the financial commitments to this multiyear project”.
