Black Hills signs deals to power Google's planned Cheyenne data center with $1.8 billion of new gas generation

Black Hills has signed long-term contracts to power a Google data center planned for Cheyenne, Wyo., and will spend $1.8 billion on new natural gas generation to help supply it.

The Rapid City, S.D., utility said after the stock market closed on Tuesday that the agreements took effect Sept. 30 and run through 2048. Neither the power plants nor the data center has been built. Black Hills plans to start delivering energy in late 2027 and expects the site to reach its peak load in 2030.

The project will draw on about 2.7 gigawatts of resources, including reserve margins and excluding added transmission. Black Hills will supply up to 590 megawatts over the grid. Of that, 564 megawatts will come from new gas-fired units it will build between 2027 and 2029 and own through a non-regulated affiliate at its existing Cheyenne Prairie Generating Station, and the other 26 megawatts from market purchases and regular industrial utility service. It will also manage the output of about 2.1 gigawatts of other Wyoming resources under contract to the project, run through a privately managed microgrid, and collect fees for coordinating them. For scale, the company's Cheyenne-area electric utility set an all-time peak of 439 megawatts on July 20.

Black Hills shares rose about 4.5% to $73.95 in after-hours trading as of 7:40 p.m. ET, according to cnbc.com market data, after closing up 0.4% at $70.74 before the announcement.

What Black Hills expects to earn

Black Hills says it will start earning a return on the generation investment when construction begins in 2027, and that the microgrid management fees will begin in late 2027 and rise on a schedule written into the contract. It expects the project to contribute about $150 million of net income in 2030 and about $2.4 billion of unlevered free cash flow through 2048 after the $1.8 billion of construction spending, with the plants fully depreciated by the end of the contract.

That is a big number for a company this size. Its 2026 guidance of $4.25 to $4.45 a share in adjusted earnings, applied to its 76.1 million diluted shares in the second quarter, works out to about $323 million to $339 million for this year, so the 2030 contribution would equal a bit less than half of that, by TickerGrove's calculation. That comparison leaves out the company's pending merger, which would change its size and share count.

It plans to pay for the build with project cash flow, debt and other financing while keeping its investment-grade credit ratings. Google has already advanced $399 million, refundable, to buy equipment with long lead times, and Black Hills expects to pay that back by June 30, 2027.

Who carries the cost

The hard question with data centers is who pays if the load arrives late, shrinks or leaves. Black Hills says the answer here is Google. "Importantly, these agreements and supporting regulatory mechanisms are structured so that Google bears all costs associated with serving the planned data center throughout the life of the project," said Linn Evans, Black Hills' president and chief executive.

The company listed cost pass-through terms, full recovery of the generation investment over the contract so other customers are protected from stranded plants, provisions covering early termination, and collateral behind the data center's commitments. Those are Black Hills' descriptions. It did not publish the contracts or the rates and fees Google will pay.

From unnamed customer to Google

Tuesday's announcement names a customer Black Hills had described for months. The release says Google's advances came under the parties' generation reservation agreement, a bridge deal Black Hills' Wyoming utility signed in April with a prospective customer planning a 1.8-gigawatt data center, so equipment could be reserved while the two sides negotiated. Those advances reached $285 million by June 30, and the parties raised the total to $377 million in July, according to the company's quarterly report. In June, Black Hills said Crusoe was no longer the development partner but that the project had not been paused and was tracking for service in early 2028.

Local reporting filled in the rest. Cowboy State Daily reported in July that county planning filings identify Google as the owner of a 2.7-gigawatt campus 8 miles south of Cheyenne, now called Project Tembo, and that Google's application says Tallgrass Energy will combine power from Black Hills Energy, fuel cells and its own plant. In September, a Google executive told residents that its investments there amount to $17 billion, Cap City News reported. Black Hills did not name the site on Tuesday, and its release included no comment from Google, which on the same day announced a separate long-term deal to buy power from Constellation Energy's nuclear plants.

Permits, power lines and a pending merger

A certificate for the Robinson substation was approved in May and an air quality permit for the Cheyenne Prairie expansion in August, while an industrial siting permit for the expansion was filed in July. Black Hills also expects to need more transmission for this project and other large customers in the region, spending it calls upside to its current capital plan. It has asked Wyoming regulators for a mechanism to bill transmission costs directly to large customers, filed for a South Cheyenne transmission expansion in September and plans another transmission filing in the fourth quarter.

Black Hills is also trying to finish its all-stock merger with NorthWestern Energy, agreed in August 2025, which would rename the combined parent Bright Horizon Energy. Montana's utility regulators are the last approval the companies need. Their decision is due by Oct. 12 but could be extended to Nov. 10, the Daily Montanan reported last month.