NiSource Inc. (NYSE:NI) has entered into a 20-year energy agreement with Microsoft Corporation (NASDAQ:MSFT) to supply approximately 1,100 megawatts (MW) of generation resources to a data centre campus in northwest Indiana.
Electricity service is expected to begin in 2028, with Microsoft agreeing to fund the generation and transmission infrastructure required to meet the facility’s power requirements.
The agreement will be implemented through NiSource Generation Company LLC (GenCo), a generation subsidiary of NiSource, and is structured to prevent the additional infrastructure costs from being passed on to existing Northern Indiana Public Service Company LLC (NIPSCO) electricity customers.
NiSource also increased its projected customer savings associated with its data centre agreements to approximately $1.75 billion over the life of the contracts, compared with a previously announced estimate of $1.4 billion.
Microsoft to Fund Generation and Transmission Infrastructure
Under the agreement, Microsoft will be responsible for funding all generation and transmission infrastructure required to serve its data centre campus.
The arrangement is intended to ensure that the costs associated with supplying the additional electricity demand are borne by Microsoft rather than existing NIPSCO customers.
The infrastructure will be developed through NiSource’s GenCo subsidiary, which provides generation resources for large electricity customers.
The agreement covers approximately 1,100 MW of generation resources over a 20-year period.
The scale of the commitment reflects the substantial electricity requirements associated with large data centre operations, particularly facilities supporting cloud computing and artificial intelligence workloads.
NiSource has not yet disclosed the total capital expenditure associated with the agreement or the detailed composition of the generation resources.
Further financial and operational information is expected during the company’s third-quarter earnings call.
NIPSCO Customer Savings Estimate Increases to $1.75 Billion
NiSource said the Microsoft agreement increases its projected savings for existing NIPSCO electricity customers to approximately $1.75 billion over the life of its data centre contracts.
The revised figure compares with the company’s previously disclosed estimate of $1.4 billion.
The increase of approximately $350 million reflects the additional benefits NiSource expects from its arrangements with large electricity users.
According to the company, the savings could amount to as much as $140 annually for each existing electricity customer.
The projections are based on the anticipated financial effects of the company’s data centre agreements and are not guaranteed annual reductions for every customer.
The arrangement is designed to support large-scale electricity demand while limiting the financial impact on households and businesses already served by NIPSCO.
GenCo Contracts 600 MW of Battery Storage
In connection with the Microsoft agreement, NiSource Generation Company has contracted 600 MW of battery energy storage capacity under a long-term tolling agreement.
The battery storage facility will be developed and constructed by an affiliate of AGP Group.
Once operational, the facility will become part of GenCo’s generation and storage resource portfolio serving multiple large-load customers.
Battery energy storage systems can store electricity for use at a later time, providing additional flexibility in managing electricity supply and demand.
The contracted 600 MW represents the facility’s power capacity. NiSource did not disclose its energy storage duration or total megawatt-hour capacity.
The company also did not specify the project’s construction timetable or expected commissioning date.
The battery storage arrangement forms part of NiSource’s wider approach to meeting the electricity requirements of large commercial customers.
NiSource Targets Growing Data Centre Electricity Demand
The agreement expands NiSource’s involvement in supplying electricity to large data centre developments.
Demand for electricity from data centres has become an increasingly important consideration for US utilities as technology companies expand computing infrastructure.
Large facilities require substantial generation capacity and transmission connections, creating additional investment requirements for electricity providers.
NiSource’s agreement with Microsoft establishes a long-term commercial framework for supplying the Indiana campus while allocating the associated infrastructure costs to the technology company.
The 20-year duration provides a defined contractual period for the planned electricity supply arrangements.
However, the financial contribution of the agreement to NiSource’s earnings and cash flow has not yet been disclosed.
The company is expected to provide further information during its upcoming quarterly results presentation.
NiSource and Microsoft Emphasise Customer Cost Protection
NiSource President and Chief Executive Officer Lloyd Yates described the agreement as part of a balanced approach to attracting investment while protecting existing electricity customers.
The company said the arrangement is designed to support economic development associated with data centre construction without requiring existing ratepayers to finance the additional infrastructure.
Microsoft Senior Director of Energy Markets Jeff Riles said the company is “committed to paying our own way”.
Microsoft also emphasised that the agreement is structured to avoid increasing electricity prices for other customers as a result of its data centre’s power requirements.
The statements reflect the companies’ focus on the allocation of infrastructure costs as utilities respond to increasing electricity demand from large technology facilities.
The projected customer savings will depend on the performance and implementation of NiSource’s broader portfolio of data centre contracts.
Service Expected to Begin in 2028
Electricity service to Microsoft’s northwest Indiana data centre campus is scheduled to begin in 2028.
The agreement covers approximately 1,100 MW of generation resources and extends over 20 years.
Preparations will involve the development of the required generation and transmission infrastructure, alongside the integration of contracted battery storage resources into GenCo’s portfolio.
The company has not disclosed a detailed construction schedule or identified the individual generation projects that will supply the campus.
Further information about the financial structure and operational arrangements is expected during NiSource’s third-quarter earnings call.
Investors Await Financial Details of Microsoft Agreement
The Microsoft agreement represents a significant long-term electricity supply commitment for NiSource, supported by a customer-funded infrastructure model.
The arrangement provides for approximately 1,100 MW of generation resources, while GenCo has separately contracted 600 MW of battery storage capacity for its wider portfolio of large-load customers.
NiSource also raised its projected savings for existing NIPSCO customers to $1.75 billion over the life of its data centre agreements.
For investors, the principal considerations include the timing of infrastructure development, the financial contribution of the 20-year contract and the company’s ability to meet increasing electricity demand without adding costs for existing customers.
Additional disclosures during NiSource’s third-quarter earnings call are expected to provide greater clarity on the agreement’s financial and operational implications.