Oracle's New Mexico AI data center hits power, permitting roadblocks

Oracle removed BorderPlex as partner from New Mexico data-center project

Oracle issued a force majeure notice this week to Stack Infrastructure, the developer of its planned New Mexico AI data-center campus known as Project Jupiter, the Wall Street Journal reported. The notice allows the company to push back the date at which it begins paying full rent on the site, citing challenges over power supply, permitting and local resistance in Doña Ana County.

The lease gives Oracle the right to defer payments for up to three years, but does not reduce its overall financial exposure to the development, according to people with knowledge of the deal. Pulling the force majeure lever triggers an automatic extension of the lease’s duration, meaning the ultimate amount Oracle pays Stack would not decline.

Oracle signed the lease for the New Mexico facility with so-called “hell-or-high-water” terms, meaning the deal cannot be terminated and Oracle is obligated to make rent payments regardless of whether it has secured the power needed to operate the data centers, the people said.

“Project Jupiter remains on our planned schedule,” an Oracle spokesman said in an email. “We are fully committed to New Mexico and confident in our path forward.” Oracle also said that force majeure notices are commonplace in projects like the one in New Mexico and do not necessarily mean there is a delay or change in expectations.

“Blue Owl, Stack Infrastructure and Oracle remain fully aligned on Project Jupiter,” a Blue Owl spokesman said in an email. “This notice does not change the financial commitments to this multiyear project.”

The Project Jupiter development is part of Oracle’s broader push to lease AI computing capacity for OpenAI. About a year ago, OpenAI signed a contract with Oracle to buy $300 billion in cloud-computing services over five years. Oracle, which did not yet have the data-center footprint to deliver that capacity, quickly signed leases to occupy new mega-facilities in Texas, Wisconsin, Michigan and New Mexico, representing roughly 4.5 gigawatts of computing capacity.

For the New Mexico campus, a group of about 20 banks provided $18 billion in construction financing, and Blue Owl Capital funds contributed about $3 billion of equity. Stack Infrastructure, the site’s developer, is owned by Blue Owl Capital funds.

The setbacks stem in part from permitting and power-supply issues. Oracle overhauled its original power plans to address local resistance to using gas turbines and diesel generators, and earlier this year Oracle and BorderPlex announced a switch to Bloom Energy fuel cells. The company has yet to obtain the air permits it needs from the state, and a small portion of a proposed 17-mile natural-gas pipeline would pass through state land and has been rejected twice, according to the Journal.

In recent months, Oracle also removed one of its key land and power partners from the development. BorderPlex Digital Assets, which started working on the project in late 2024 and had early support from Gov. Michelle Lujan Grisham, is set to receive a payment from Oracle to relinquish the rights it held to the project’s land and power, people familiar with the matter said.

Project Jupiter’s first phase was originally expected to be completed in the third quarter of 2028. Stack is currently earning the equivalent of a 9% annualized return for Blue Owl from money raised to build the project, people familiar with the matter said. The financing package set aside funds for up to three years of potential delays before lease payments begin, at which point the developer’s forecast return jumps to 11%.

Lenders are showing signs of unease about their exposure to Oracle. At least one bank that arranged the New Mexico loans sold off a portion of the debt for a price below 90 cents on the dollar, implying a paper loss of at least $1.8 billion for original lenders, according to people familiar with the matter. Most banks hold construction loans they make until their due dates and do not adjust their valuations based on market fluctuations. The Financial Times earlier reported the bank debt sale.

Earlier this year, banks also struggled to sell billions of dollars of loans they made to build data centers leased to Oracle in Texas and Wisconsin, the Journal previously reported.

Bond investors have raised questions about Oracle’s financial stability and its investment-grade credit rating. S&P Global Ratings downgraded Oracle’s credit rating to one notch above “junk” territory in July, saying its “rapidly expanding AI infrastructure business is increasing its overall credit risk.” Oracle’s capital spending on AI equipment and property has exceeded its cash flows from operations for several quarters.

Oracle’s stock fell as much as 8% in morning trading on the news before bouncing back slightly, ending the day down 4%. Blue Owl stock declined about 3.6%.