$5.3 billion pours into off-site power supply: Private equity giants vie for energy access to AI data centers

The power bottleneck in AI data centers is fueling a massive wave of off-site power supply financing. Private equity giants such as Blackstone, KKR, Apollo, and Brookfield are entering this arena through various means, including project investment, equity participation, and equipment financing, attempting to bypass the lengthy grid construction cycle and directly provide usable power to data centers.

Blackstone leads a $5.3 billion bet on off-site natural gas power generation.

This summer, a consortium led by Blackstone, with participation from KKR and Apollo, reached an agreement with pipeline giant Williams to acquire a 49% stake in five natural gas-fired power generation projects under development for $5.3 billion. These projects are designed to provide off-site power to data centers.

Speed is the core competitive advantage of off-site power generation. Williams stated that its first 200 MW of off-site generating capacity was online in less than 18 months after commercialization. In contrast, according to Fitch Ratings, it typically takes 5 to 10 years to build new grid connections for power plants and high-voltage transmission lines.

Equity investment and equipment financing: two parallel paths

In addition to direct investment at the project level, some investors have begun to directly hold equity in off-site power supply companies in order to gain broader exposure to industry growth.

In May of this year, Blackstone and Halliburton jointly announced a $1 billion equity investment in VoltaGrid, a company specializing in the construction and operation of off-site natural gas power supply systems for data centers.

Carl Bivens, a real estate partner at the law firm Troutman Pepper Locke, stated:

With a large influx of private equity and other funds into the market, different transaction structures have emerged. When private equity gets involved, they want to hold ownership of the development entity.

Another approach is to provide equipment financing for end customers. Last fall, Bloom Energy announced that Brookfield Asset Management had agreed to provide up to $5 billion to finance future power projects for AI data centers, with Bloom supplying fuel cells. In June of this year, Bloom announced that Brookfield had expanded its potential financing to $25 billion.

According to a source familiar with the financing, Bloom has relied on infrastructure funds and investment firms to form special purpose vehicles (SPVs) to finance its product deployments for over a decade, but investor interest has recently accelerated significantly.

Project-level financing continues to be secured, with Oaktree Capital investing in Nebius.

In July of this year, project developers Industrial Development Funding (IDF) and Oaktree Capital Management announced a joint investment of $1.7 billion to install Bloom fuel cells at the Nebius data center.

In this transaction structure, Oaktree Capital provides minority equity financing, Mitsubishi UFJ Financial Group (MUFG) leads senior debt financing, and Nebius pays Bloom for electricity.

Contract term mismatch becomes a potential risk point.

Off-site power supply assets can have a lifespan of decades, but AI computing power contracts are typically much shorter, with GPUs in data centers often facing obsolescence within a few years. This mismatch in lifecycles is the core structural risk currently facing investors.

As a result, investors are pushing for longer-term customer commitments. Carl Bivens stated that the market is increasingly demanding 10- to 15-year contracts from large cloud providers, with a 5-year renewal option.

"This provides investors with a longer, guaranteed rental runway and allows institutional investors to amortize their costs on off-balance-sheet solutions or data center construction," he said.

IDF CEO Nik Nunes offered an alternative approach: even if data center power demand changes, the power supply assets themselves still have value—they can sell power to a wider market.

"If I have a power module that has been significantly amortized over six to eight years, I have a lot of flexibility to sell the electricity to the grid or other markets," Nunes said.

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