Oracle has written to Blue Owl Capital, the private credit funders for most of its Stargate-OpenAI data centre push, claiming force majeure on delays on their Project Jupiter facility under construction in New Mexico. [Bloomberg, archive]
This is about the power supply for the data centre. The gas pipeline for the generators has been delayed repeatedly. So Oracle wants to put off full rent payments until the pipeline is in place. [Bloomberg, archive]
The gas pipeline has been delayed because Oracle and Blue Owl went full steam ahead on the project before they got all the permits they needed. They hoped for the pipeline to be up and running last month. But now it looks like it won’t be up before late 2027. If then. New Mexico has refused the permit twice.
“Force majeure” usually means a natural disaster hit you — not “we didn’t get our permits”. Oracle is not making friends locally by playing fast and loose:
Before Project Jupiter was revealed in full, the developers worked with local officials on an incentive plan and a strategy for how to roll out information to the public, according to documents previously reviewed by Bloomberg. Locals only learned the venture was tied to Oracle and OpenAI after it was approved.
The locals are pushing back hard on what two gigawatts of burning gas will do to the local environment.
And Oracle cannot terminate the data centre lease: [WSJ]
Oracle signed a lease for the New Mexico facility with so-called hell-or-high-water terms, meaning the deal can’t be terminated and Oracle is obligated to make rent payments regardless of whether it has secured the power to operate the data centers, according to people with knowledge of the deal.
So Oracle is on the hook even if the site never gets enough power.
This is not the end of the project. As yet. This is Oracle opening negotiations with Blue Owl about the delay.
But calling force majeure this early in a project does not look good. The lenders are already losing confidence in Oracle and Blue Owl’s debts on the project:
At least one bank that arranged New Mexico loans sold off a portion of the debt for a price below 90 cents on the dollar.
Oracle stock dipped 7.5% on the news. Blue Owl dipped 5%. Bloom Energy, who are contracted to build the generators, dipped 7% but has since recovered.
This does not mean the end of Oracle, it doesn’t mean the end of Blue Owl, and it doesn’t mean the end of the AI bubble. But for the investors, it is like seeing another rivet pop out of the bridge. We’ll get there.
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