Shares of Black Hills Corp. jumped 5% in after-hours trading Tuesday following the announcement of definitive agreements to power a planned Google data center in Cheyenne, Wyo.
To support the massive project, the South Dakota-based utility will invest $1.8 billion between 2027 and 2029 in new natural gas power generation, reflecting a broader rush among tech giants to secure reliable electricity for energy-intensive artificial intelligence (AI) infrastructure.
Under the long-term agreements, which run through 2048, Black Hills will deliver up to 590 megawatts (MW) of grid-connected energy service and manage an additional 2.1 gigawatts (GW) of third-party contracted resources via a private microgrid. In total, the project will draw on a 2.7-GW resource mix, including reserve margins.
To supply the grid-connected power, Black Hills plans to construct 564 MW of company-owned natural gas generation at its existing Cheyenne Prairie Generating Station, procuring the remaining 26 MW through market energy purchases and retail utility services.
Financially, the deal represents a substantial growth vehicle for Black Hills. The utility projects the agreement will add approximately $150 million to its net income in 2030 and generate roughly $2.4 billion in unlevered free cash flow through 2048, net of the initial $1.8 billion capital expenditure.
The company expects to begin earning returns on its generation investment when construction kicks off in 2027, with microgrid management fee revenues starting later that same year. Power deliveries are slated to commence in late 2027 before reaching peak load in 2030.
Crucially for existing rate-based customers, the agreements contain strict provisions to prevent cost-shifting. Google will cover all expenses associated with powering the facility over the life of the project. To accelerate equipment procurement, Google has already provided Black Hills with $399 million in refundable advances for long-lead-time items, which Black Hills plans to reimburse by June 30, 2027.
Black Hills intends to fund the capital investment through project-generated cash flow, debt issuance, and other financing options while maintaining its investment-grade credit profile.
The deal highlights the accelerating demand big tech is placing on traditional energy providers. In a parallel move to power its footprint, Google recently signed a massive 3.59-GW energy contract with Constellation Energy, which is committing more than $4.3 billion to its generation fleet.
The announcement comes as Black Hills continues to navigate a major structural transition, following its agreement last August to merge with NorthWestern Energy in an all-stock transaction designed to form a $15.4 billion combined electric and natural gas utility.
