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Wisconsin regulator maintains financial security rules
Oracle (NYSE:ORCL) could be required to provide more than $7 billion in financial guarantees for its planned Wisconsin data centre after state regulators declined to ease credit requirements intended to shield electricity customers from higher energy costs.
According to the Financial Times, the Wisconsin Public Service Commission has decided not to revise the conditions imposed on utility provider We Energies. Under the current framework, Oracle may need to secure a letter of guarantee worth approximately $7 billion, a requirement that could cost the company more than $100 million each year.
AI infrastructure project faces additional costs
The planned data centre in Port Washington, Wisconsin, is expected to deliver nearly one gigawatt of computing capacity and forms part of Oracle’s $300 billion computing infrastructure agreement with OpenAI.
The potential guarantee requirement adds another financial consideration to Oracle’s expanding artificial intelligence strategy, alongside increasing debt levels and significant capital spending associated with building AI infrastructure.
Credit rating requirement triggers guarantee obligation
Under We Energies’ tariff for very large electricity users, developers of major data centres with an S&P credit rating below A-minus must provide collateral either in cash or through a letter of credit.
The Financial Times reported that the required amount is calculated using the value of the power generation and transmission infrastructure constructed specifically to supply the facility.
At the time the policy was introduced, Oracle held a BBB credit rating, two levels below the minimum threshold established under the tariff.
Oracle challenges the policy
Last month, Oracle asked a county court to invalidate the rule and permit We Energies to waive the collateral requirement.
The company argued that the policy could impose excessive financial costs on large-scale technology projects and discourage future investment in Wisconsin, according to the Financial Times.
A spokesperson for the Wisconsin regulator confirmed to the newspaper on Monday that the commission had decided not to move forward with Oracle’s petition.
Oracle told the Financial Times that it remains optimistic the commission will eventually reconsider its position after evaluating the employment opportunities and economic benefits expected from the $15 billion investment.
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