This Under-the-Radar Utility Just Signed a Massive Data Center Deal Without Anyone Noticing
If you look beyond the biggest names in the business, you'll find smaller players are cashing in on the AI revolution just as well.
A small utility company, Black Hills, has signed a significant data center deal with Google parent Alphabet, which is so under-the-radar that many might not have noticed. The deal involves Black Hills providing 590 megawatts of electricity to power a data center operated by Alphabet through 2048. This substantial commitment enables Black Hills to invest $1.8 billion in new natural gas electricity-generation capacity, expanding its potential output to 2.7 gigawatts.
This extra capacity is expected to generate about $150 million in net income in 2030 and $2.4 billion in free cash flow over the deal's lifespan, even after accounting for the $1.8 billion in capital expenditures. For context, Black Hills has a market capitalization of just $6 billion and annual revenue of less than half that amount, making it a relatively unknown player in the utility business.
However, it boasts a strong dividend yield of 3.6% and has increased its quarterly dividend for 56 years straight. This deal between Black Hills and Alphabet highlights the growing trend of partnerships between smaller utility companies and large tech corporations, driven by the increasing demand for electricity from data centers, especially those supporting artificial intelligence applications.
While larger utilities like Vistra, which has power purchase agreements with tech giants like Microsoft and Meta Platforms, also play a role in this market, the story underscores that even smaller, under-the-radar utilities like Black Hills can be valuable investment opportunities, particularly those with a track record of reliable dividends.
Written by urgent.news from Motley Fool's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
