Google will cover the cost of Black Hills' $1.8 billion gas build for its Cheyenne data center

Black Hills does the spending, between 2027 and 2029 ^[2]. Google's obligation is to cover the full cost of supplying the data center, so none of it is passed on to the utility's other customers ^[9]. Black Hills still earns on the capital. Its 2030 profit forecast works out to roughly 8.3 cents for every dollar of the build ^[20], and the build comes to about $3.2 million per megawatt of new gas capacity ^[17].

Most of the supply will belong to other companies. The grid supply and the third-party microgrid resources together come to 2.69 GW ^[19], close to the 2.7 GW resource mix, reserves included, that the company cites ^[6]. Third parties own about 78% of it ^[18]. Black Hills puts its own capital into the 564 MW plant at Cheyenne Prairie ^[3] and manages the rest.

Black Hills' long-dated projection is $2.4 billion of unlevered free cash flow through 2048, after capital expenditures ^[12]. If the capex netted out there is the $1.8 billion build, the project generates about $4.2 billion before it ^[21]. Free cash flow comes to 1.33 times the build cost ^[24], earned over roughly 21 years from first delivery ^[23]. Crypto Briefing noted that the projection assumes the data center keeps running, and keeps needing this power, for more than 20 years ^[16]. The reports do not give the length of Google's contract or the fuel behind the third-party supply.

The deal can go a few ways from here. Construction can slip, and the 2030 profit moves out with it ^[8]. The Cheyenne load can fade well before 2048, and then the question is whether Black Hills or Google pays for a gas plant with years of life left ^[12]. Or Google's full-cost obligation ^[9] can turn out to cover the plant whether or not the power is drawn.

I think the $1.8 billion belongs in a model as contracted capex with one counterparty, valued on Google's credit and the contract's length ^[2]. On that basis the after-hours rise in the shares ^[13] is a bet on the 2030 earnings arriving on time. The counter-case is that this spending is safer than ordinary utility capex, because none of its cost lands on other customers ^[9]. A contract running close to 2048, with payments that cover the undepreciated plant if Google leaves, would make the 2048 forecast ^[12] as secure as the 2030 one, and this view too cautious.

The evidence covers one site and one owned gas plant ^[3]. Google has also signed a 3.59 GW power contract with Constellation Energy, which will invest more than $4.3 billion in its fleet ^[11], so the same buyer is contracting for supply under more than one structure.