Microsoft signed a long-term energy purchase agreement with Chevron to power a planned data center in West Texas using natural gas turbines from GE Vernova, Chevron announced Monday. The agreement centers on Project Kilby, a power plant in Reeves County expected to deliver 2.7 gigawatts of capacity — equivalent to power for 2 million households — with energy delivery to the data center starting in 2028. The off-grid configuration addresses concerns about AI data center projects straining local power grids, a factor Wells Fargo identified as part of political resistance to such developments.
Project Kilby Specifications and Timeline
Project Kilby will be located beside the Microsoft-operated data center in Reeves County and will not run off the public grid. Chevron will supply the natural gas, while GE Vernova will provide the majority of the large turbines to support the plant. Caterpillar is expected to provide the remainder of the turbines. Jeff Gustavson, president of Chevron New Energies, stated in an interview Monday that "there's really no competition with local electricity consumers" and that "over time, as we have excess power, we plan to push that into the grid to help stabilize it." Gustavson said Project Kilby has community support in an area where Chevron has a long history. The Microsoft data center is not expected to start receiving power from the plant until 2028.
GE Vernova Backlog Reaches $163 Billion
A GE Vernova spokesperson confirmed that Project Kilby turbines are factored into the company's backlog, which totaled $163 billion at the end of March. The company expects that number to reach $200 billion by the end of 2027, a year earlier than previously expected. GE Vernova is sold out of heavy-duty turbines through at least 2028, with little capacity across 2029 and 2030. Wells Fargo analysts estimate that GE Vernova, which makes steam and gas turbines, hydro generators, and nuclear reactors, generates roughly 25% of the world's electricity.
Wells Fargo Maintains Buy Rating Despite Market Volatility
Wells Fargo kept a buy-equivalent rating and a $1,259-per-share price target on GE Vernova, implying around 20% upside from Tuesday's late-session levels. The analysts wrote in a Tuesday note that "we expect GEV will continue to 'work' as long as the company continues its 'beat and raise' momentum." Shares of GE Vernova, still up 60% year to date, dropped more than 7% on Tuesday. Wells Fargo cited political resistance, increased turbine competition from rivals such as Mitsubishi, and a slowdown in the artificial intelligence trade as components of the bear case, but qualified that their base case on GE Vernova remains positive. Wells Fargo expects pricing for the heavy-duty machinery to trend higher as tech firms compete for orders, noting the company has "yet to hit a ceiling on price."
Off-Grid Configuration Avoids Public Grid Competition
The behind-the-meter energy approach prevents stresses on local power grids, addressing a concern that has met resistance in some regions. Gustavson said dozens of similar projects have been announced around the nation, but few are as far along as Project Kilby. Bernstein analyst Sunaina Ocalan called Project Kilby "just another proof point of the enormous power demand that we're seeing" in the AI boom, adding that "higher demand is driving better pricing power for GE Vernova that is translating into margin expansion."
FAQ
What capacity will Project Kilby deliver to Microsoft's data center?
Project Kilby is expected to deliver roughly 2.7 gigawatts of capacity, equivalent to the power needed for 2 million households.
When will Microsoft's data center start receiving power from Project Kilby?
The Microsoft data center is not expected to start receiving power from the plant until 2028.
What is GE Vernova's current backlog and future projection?
GE Vernova's backlog totaled $163 billion at the end of March, and the company expects that number to reach $200 billion by the end of 2027.
