Microsoft's $1 billion Kenya AI data center stalls as power demands could shut down half the country

Microsoft's massive Kenya AI data center would require switching off 'half the country' to meet power requirements, government says -- $1 billion project stalls over capacity disagreements and lack of infrastructure

A $1 billion data center that Microsoft and Abu Dhabi-based AI firm G42 planned to build in Kenya has stalled after the Kenyan government failed to meet Microsoft's demand for guaranteed annual capacity payments, Bloomberg reported Sunday. Kenyan President William Ruto put the scale of the project's power requirements into clear terms at a recent state event in Nairobi, saying the country would need to "switch off half the country" to keep the facility running. The project, announced in May 2024 during Ruto's visit to Washington, was supposed to bring a geothermal-powered data center to the Olkaria region in Kenya's Rift Valley. G42 was to lead construction, with the facility running Microsoft Azure in a new East Africa cloud region. The first phase targeted 100 megawatts of capacity and was expected to be operational by this year, with a long-term goal of scaling to 1 gigawatt. President Ruto isn't exaggerating about shutting off half the country's power. Kenya's total installed electricity capacity sits between 3,000 and 3,200 megawatts, and peak demand reached a record 2,444 megawatts in January, according to data from KenGen, the country's government-owned electricity producer. The full 1 gigawatt build would therefore have consumed roughly a third of the country's total capacity, and even the first 100 megawatts would have required a significant share of the Olkaria geothermal complex's output, which currently generates around 950MW across all its plants. John Tanui, principal secretary at Kenya's Ministry of Information, told Bloomberg that the project hasn't been withdrawn and that talks are continuing, adding that the "scale of the data center they [Microsoft] wanted to do still requires some structuring." A separate 60-megawatt project with local developer EcoCloud is also still under discussion. Kenya's Microsoft campus was set to be the first facility that Microsoft and G42 built together after Microsoft invested $1.5 billion in G42 back in 2024. That deal followed G42's agreement to divest from Chinese holdings and strip Huawei equipment from its systems under pressure from Washington. Microsoft President Brad Smith joined G42's board as part of the arrangement and described the Kenya project at the time as the "single biggest step forward" for digital technology in the country's history. Meanwhile, Huawei is expanding its presence in Kenya, having launched a new fiber broadband service with Safaricom, Kenya's largest telecom operator, last week. Africa currently hosts roughly 1% of the world's data center capacity. Microsoft is spending $190 billion on capex in 2026, and the company adds approximately 1 gigawatt of data center capacity every three months globally. But power constraints are proving to be a universal bottleneck: nearly half of planned U.S. data center builds this year have been delayed or canceled due to shortages of electrical infrastructure. Follow Tom's Hardware on Google News, or add us as a preferred source, to get our latest news, analysis, & reviews in your feeds.

Microsoft's African data center falters on payment demands, Bloomberg News reports

May 10 (Reuters) - A Microsoft (MSFT.O), opens new tab data center site in East Africa has been delayed by disagreements with the Kenyan government over the company's request for guaranteed payments, Bloomberg News reported on Sunday citing people familiar with the matter. In May 2024, Microsoft partnered with UAE-based AI firm G42 to invest $1 billion in a data center in Kenya ⁠as part of its efforts to expand cloud-computing services in East Africa. The project was announced during Kenyan President William Ruto's state visit to Washington under the Biden administration. The facility was set to run entirely on geothermal power as well as provide access to Microsoft's Azure through a cloud region for East Africa. Microsoft and G42 asked the Kenyan government to commit to paying for a certain amount of capacity annually, ⁠but the talks broke down when it couldn't provide the guarantees at the level Microsoft requested, the Bloomberg report said. The Bloomberg report added that the group might ultimately decide to scale back the project. Kenya is moving ahead ⁠with the talks, and "it is not failed or withdrawn," Bloomberg quoted principal secretary at Kenya's Ministry of Information John Tanui as saying in an interview. "The scale ⁠of the data center they wanted to do still requires some structuring," he said, adding that power requirements are still under discussion. Microsoft, ⁠G42, and Kenya's Information Ministry did not immediately respond to a Reuters request for comment. Reuters could not immediately verify the Bloomberg report. Reporting by Rishabh Jaiswal in Bengaluru; Editing by Andrea Ricci Our Standards: The Thomson Reuters Trust Principles., opens new tab

Microsoft-G42 Kenya data centre stalls over government offtake demands

The company asked the Kenyan government for a guaranteed annual capacity offtake. The government did not commit at the level Microsoft requested. Talks have broken down for now; the project is not formally cancelled. A $1bn Microsoft data-centre project in Kenya, structured as a partnership with UAE-based G42, has stalled after the two companies failed to agree on commercial terms with the Kenyan government, Bloomberg reported on Saturday. The sticking point is offtake. Microsoft asked Nairobi for a guarantee that Kenyan public bodies would buy a defined amount of computing capacity each year. The government did not commit at the level Microsoft requested. Talks broke down. The project was announced in May 2024 and structured as a flagship of Microsoft's East Africa expansion: a geothermal-powered facility supplying Azure to government, enterprise, and developer customers across the region, with G42 as a strategic co-investor. The $1bn budget was split between Microsoft and G42, with the Kenyan government providing land, power-purchase terms, and regulatory facilitation. Geothermal power, available cheaply and abundantly in Kenya, was central to the pitch. Microsoft has not formally cancelled the project. The Kenyan Ministry of Information told local press that the project remains live: "It is not failed or withdrawn." Bloomberg's sources frame the situation as a delay, not a death; the companies may rescope the facility to a smaller footprint that does not require the same offtake guarantee. What is clear is that the original commercial structure does not currently work. The offtake demand is the unusual element. Hyperscalers do not typically ask host governments to guarantee compute purchases; the same offtake question Western utilities are answering, where utilities and offtakers commit to long-term capacity contracts that anchor a build. Microsoft applied the same logic in East Africa because the local enterprise market on its own is not large enough to justify a $1bn facility, and because financing partners are increasingly insisting on guaranteed revenue floors for projects in higher-risk geographies. Kenya's government, facing a tight fiscal environment and contesting IMF programme conditions, could not commit to the multi-year buy-in. The political layer is real but secondary. Kenya is finalising a national AI strategy and has framed digital infrastructure as a development priority; cancelling the deal carries domestic political cost. Equally, committing public budget to multi-year compute contracts when health, education, and infrastructure spending are under pressure is hard to defend. The mismatch is structural rather than personal. G42's position is interesting. The UAE-backed firm has been on a global build, with significant capacity announcements in the US, Italy, and France over the past eighteen months. G42's separate US data-centre footprint makes the East Africa pause look less like a strategic retreat than a regional reset. G42 has more cash, more flexibility about siting, and more leverage with non-US partners than its Microsoft co-investment historically allowed. A scaled-back Kenya facility funded primarily by G42, with Microsoft as a service tenant, is a structure both parties could accept; whether they will is uncertain. Microsoft, separately, announced a $329m expansion in South Africa last month, partly framed as a hedge against the East African delays. South Africa's commercial market is larger, the regulatory environment more predictable, and the offtake question more easily answered by existing private-sector demand. The expansion is incremental rather than transformational, but it ensures Microsoft's Azure Africa footprint continues to grow even if Kenya does not deliver on the original timeline. For Kenya, the broader cost is reputational. The Microsoft-G42 facility was meant to anchor an East African digital hub spanning Rwanda, Uganda, Tanzania, and Ethiopia, with downstream effects on submarine cable landings, fintech build-out, and AI talent pipelines. The stall does not foreclose those, but it requires the country to find a new anchor tenant or shift the model. The closest substitutes, Equinix and Africa Data Centres, do not bring the same hyperscaler relationship. Whether Microsoft and G42 return to the table depends on whether Nairobi can offer a structure that gives the operators revenue certainty without the kind of guarantee that would breach its fiscal constraints. A shorter contract, a smaller initial scope, a different financing partner: any or all of those could revive the deal. None of them is the original. The Kenya story is also a useful data point for other African governments competing for hyperscaler builds. Nigeria, Egypt, and Senegal are all in different stages of negotiation.

Kenya tells Microsoft that $1 billion AI data center would gulp half the country's electricity

The proposed facility reportedly demands electricity on a scale the country simply cannot afford right now. The AI industry keeps talking about bigger models, faster chips, and trillion-parameter futures. What it talks about far less is the absolutely absurd amount of electricity needed to keep all of this running. That reality just hit a major roadblock in Kenya, where Microsoft's proposed $1 billion AI data center project is reportedly facing resistance after government officials warned that the facility could consume so much power it might require "switching off half the country" to keep it operational. Microsoft's Kenya AI data center reportedly needs more power than the grid can comfortably handle The project, announced in partnership with Abu Dhabi-based AI firm G42, was originally intended to bring a large Azure cloud and AI region to East Africa, powered by geothermal energy from Kenya's Rift Valley. Initial plans reportedly targeted around 100MW capacity, with long-term ambitions stretching toward 1GW. However, that scale is now becoming the biggest issue. Kenya's peak electricity demand, as per Bloomberg's report, already touched roughly 2,444MW earlier this year, meaning a fully scaled 1GW AI facility could consume an enormous chunk of the nation's available power infrastructure. Negotiations between Microsoft, G42, and Kenyan authorities have reportedly stalled over power guarantees and infrastructure concerns, though officials insist the project has not been canceled outright. The AI boom is quietly turning into an energy crisis nobody fully prepared for Honestly, Kenya's situation feels less like an isolated problem and more like a preview of what the global AI race could start looking like very soon. AI data centers are becoming so power-hungry that entire countries are beginning to rethink whether their grids can realistically support these projects without affecting ordinary citizens. The uncomfortable reality is that AI's massive energy demands are becoming harder to ignore globally, with data centers already consuming a significant share of electricity in major markets. Kenya simply ended up saying out loud what many countries will probably have to confront soon: powering the AI boom is starting to look like an infrastructure problem as much as a technology one.

'We would need to shut off power for half the country': Microsoft's $1 billion Kenya data center project runs out of juice

'Future generations will be overburdened by the current decisions.' Plans to build potentially the biggest, most expensive data centre in East Africa have stalled. Sources close to the matter say that talks between the Kenyan government and Microsoft have broken down due to disagreements over annual payments. Microsoft and its partners had wanted the Kenyan government to agree to pay annually for capacity, but sources say the government could not offer guarantees for the amount requested (via Bloomberg). Microsoft president Brad Smith had previously pitched the data centre project as the "single biggest step to advance the availability of digital technology" in the country's history. The software and AI giant has been adding a gigawatt of data centre capacity about every three months in order to keep pace with global compute demand. Microsoft had partnered with G42 -- an AI company based in the United Arab Emirates -- on the Kenya data centre, partly in a bid for the Abu Dhabi-based AI company to grow beyond its home market. Microsoft has invested $1.5 billion in G42 previously. Still, the principal secretary at Kenya's Ministry of Information, John Tanui, recently said that the talks will move beyond this roadblock. Tanui said that plans for the data centre are "not failed or withdrawn," adding in an interview that, "The scale of the data center they wanted to do still requires some structuring." Plans for a geothermal-powered data centre in Olkaria, Kenya, were first announced back in 2024. The first phase of the project would cost $1 billion, and was initially expected to be operational in about two years. According to Semafor, the hope had been that geothermal would offer a consistent, sustainable source of baseload power for the project's eventual 1 gigawatt capacity, especially as this source accounts for about 40% of Kenya's energy supply. Unfortunately, committing to powering this project is far from a simple ask; Kenyan President William Ruto articulated the issue succinctly, saying, "To switch on that one data center, we would need to shut off power for half the country." Kenya's total installed capacity is about 3,000 megawatts at present. President Ruto is currently making the case to expand Kenya's energy infrastructure capacity to 10,000 megawatts by 2030, leveraging the Olkaria data centre as one driving example of projects this expanded power system could support. This policy of power expansion has been presented as part of the controversial KSh 5 trillion National Infrastructure Fund. This proposed bill aims to further develop the country's infrastructure without relying on public debt -- though a number of clauses still prioritize debt as a primary financing strategy, alongside the sale of government assets (via The Kenyan Wall Street). Auditor General Nancy Gathungu expressed concerns over the bill's proposed financial strategy, saying, "The sale of the assets may also mean that at a point in the future, there may be no more assets to sell. Future generations will be overburdened by the current decisions."

Microsoft's African data center falters on payment demands, Bloomberg News reports - The Economic Times

A Microsoft data center site in East Africa has been delayed by disagreements with the Kenyan government over the company's request for guaranteed payments, Bloomberg News reported on Sunday citing people familiar with the matter. In May 2024, Microsoft partnered with UAE-based AI firm ⁠G42 ⁠to invest $1 billion in a data center in Kenya as part of its efforts to expand cloud-computing services in East Africa. The project was announced during Kenyan President William Ruto's state visit to Washington under the Biden administration. The facility was set to run entirely on geothermal ⁠power as well as provide access to Microsoft's Azure through a cloud region for East Africa. Microsoft and G42 ⁠asked the Kenyan government to commit to paying for a certain amount of capacity annually, but the talks broke down when it couldn't provide the guarantees at the level Microsoft requested, the Bloomberg report said. The Bloomberg report added that the group might ultimately decide to scale back the project. Kenya is moving ahead with the talks, and "it is not failed or withdrawn," Bloomberg quoted principal secretary at Kenya's Ministry of Information ⁠John Tanui as saying in an interview. "The scale of the data center they wanted to do still requires some structuring," he said, adding that power requirements are still under discussion. Microsoft, G42, and Kenya's Information Ministry did not immediately respond to a Reuters request for comment. Reuters could not immediately verify the Bloomberg report.

Microsoft's African data center falters on payment demands, Bloomberg News reports

May 10 (Reuters) - A Microsoft data center site in East Africa has been delayed by disagreements with the Kenyan government over the company's request for guaranteed payments, Bloomberg News reported on Sunday citing people familiar with the matter. In 2024, Microsoft partnered with UAE-based AI firm G42 to invest $1 billion in a data center in Kenya as part of its efforts to expand cloud-computing services in East Africa. Microsoft and G42 asked the Kenyan government to commit to paying for a certain amount of capacity annually, but the talks broke down when it couldn't provide the guarantees at the level Microsoft requested, the Bloomberg report said. (Reporting by Rishabh Jaiswal in Bengaluru; Editing by Andrea Ricci)