Oracle Project Jupiter Force Majeure Notice|On-Schedule Claim vs 3-Year Rent Deferral?

Chapter 1: A notice that shifts time, not commitment

Oracle has sent a force majeure notice to the developer of its Project Jupiter data center in New Mexico. Oracle says the project is on schedule, yet the notice would let it delay payments if the campus misses its 2028 start. Project Jupiter is designed for 2.45 gigawatts of capacity. That is roughly as much electricity as 1.8 million homes use. It is part of Stargate, the AI buildout Oracle shares with OpenAI and SoftBank, and it is being built to support OpenAI. Oracle's public message and its paperwork point in different directions. A person familiar with the deal told Reuters the project faces a delay of about one year, because of difficulties securing power. Oracle's shares closed down 3.5 percent that Thursday, at their lowest close since July 31. A wait on a project this size has a price. The developer is Stack Infrastructure, owned by Blue Owl Capital. About 20 banks lent the campus $18 billion. And Bloom Energy has a contract to supply its fuel cells. Each of them is tied to that 2028 date. Force majeure clauses are common in energy and commodities contracts. They excuse a party from obligations when events outside its control get in the way. Oracle's spokesman, Michael Egbert, framed the notice as ordinary. Egbert said, "Force-majeure notices are commonplace in developments of this scale and are often used to preserve contractual rights among project partners." He added, "They do not, by themselves, establish a project delay or change delivery expectations." Blue Owl, whose unit received the notice, answered in its own statement. "This notice does not change the financial commitments to this multi-year project." Both sides sound calm. Neither statement says what the notice actually allows. Bloomberg reported that detail. Oracle could defer rent for three years after payments begin. That applies only if the companies agree a power-related force majeure event has occurred. Oracle would still pay other interim costs, and rent over the full term of the lease. Bloomberg's sources said Oracle is not seeking to exit as the campus's main tenant. Barron's noted that Oracle's long-haul expenses remain unchanged, and that the notice could only reduce some near-term cash needs. So this is not an exit. It is a timing tool. And it has a condition. According to The Motley Fool, the developer must first agree that a qualifying event occurred, and Oracle would still owe certain fees. Nobody is walking away. The open question is who waits for money, and for how long.

Chapter 2: The gas that sets the clock

The timing depends on fuel. The campus is designed to run on gas-powered fuel cells from Bloom Energy. That makes a reliable gas supply central to its timeline. That gas was meant to arrive through Energy Transfer's Green Chile pipeline, a 17-mile line to the campus. Energy Transfer moved its expected in-service date from August 15. The new date is February 1, 2027. The reason was permits. New Mexico's State Land Office denied rights-of-way across state trust lands, after opposition from local environmental groups. An initial application was denied in March, and state officials rejected the extension again in July. Then comes the detail that cuts against the calm statements. Oracle had asked federal regulators to fast-track a review so the pipeline could enter service by August 15. Oracle warned that missing that window would lead to much higher costs. That window has now passed. The pipeline is not the only gap. Project Jupiter still does not have the air permit it needs to operate its fuel-cell power plant. The New Mexico Supreme Court lifted its stay on that process, so the state can restart it and schedule a new hearing. That restarts a process. It does not finish one. The pushback is also political. New Mexico's State Ethics Commission reported that Oracle spent more than $3.4 million on ads meant to influence the air permitting process. U.S. Representative Teresa Leger Fernández called for a pause on data centers in the state. State lawmakers are also gearing up to consider a data center moratorium in next year's session. Barron's said the notice could let Oracle line up its expenses with revenue if the site is held up by community resistance, power supply or regulators. RBC Capital Markets analyst Rishi Jaluria went further. He wrote that the notice "signals the company's own risk assessment on execution has shifted enough to warrant legal cover."

Chapter 3: Who pays for the wait

There is a catch in the force majeure story. A person familiar with the matter told Reuters that securing power for the site is Oracle's responsibility under the contract. The same source said Oracle cannot terminate the lease under any circumstances. It also said Oracle is responsible for paying the debt costs. The permit denials came from state officials, not from Oracle. Yet getting power to the site is Oracle's job. Whether that counts as a qualifying event is exactly what the developer has to agree to. Several reports said it remains unclear whether the notice would release Oracle from any existing obligations. The developer's side runs on its own clock. According to the Reuters source, Blue Owl has about $3 billion of equity in Project Jupiter. During construction, it earns a 9 percent yield on that equity. Its returns rise only after the campus is finished. So a delay does not break Blue Owl's deal. It stretches the lower-return phase. Seeking Alpha summarized it this way: Blue Owl's higher post-construction yields are pushed back when completion is postponed by power issues. That puts Blue Owl's statement in context. Its financial commitments may not change. The date its bigger payoff arrives is a separate matter, and that date now depends on gas that has not arrived. The largest pile of money on the site is not equity. It is the $18 billion bank loan. Banks trying to sell those loans have reportedly had to mark them down to 89 to 91 cents on the dollar. The Financial Times, cited by Reuters, said the package is proving hard to place with big loan investors. That leaves arrangers such as Santander and Jefferies holding more of the debt than planned. The loans were underwritten on the assumption that banks could quickly resell most of the risk. That stress was reported before the notice went out. A price below 100 cents does not mean default is imminent. It means the market wants a higher return for the extra risk it sees. And the risk being priced is Oracle's. Remember, the Reuters source said Oracle pays the debt costs. S&P downgraded Oracle in July, leaving its corporate rating one notch above junk. Oracle's own bonds moved after the notice. Barron's reported that a 30-year Oracle bond issued in February was yielding 8.16 percent. That was up from 7.96 percent before the news. Over the summer, it had been 7.09 percent. Oracle's credit default swaps, the price of insuring its debt, hit record highs. The cash picture explains why near-term relief matters. Inc. reported that Oracle has had negative free cash flow for five straight quarters, burning $29.1 billion. Last quarter it spent $28.5 billion on capital projects. Its operating cash flow was $23.1 billion, about $5.4 billion short. That is the knot. The notice could ease Oracle's near-term cash. It arrived as the cost of Oracle's borrowing was climbing. KeyBanc analyst Jackson Ader said, "Oracle is in the most tenuous of cash positions of all the major hyperscalers."

Chapter 4: The date that decides

The supplier is not sounding an alarm. Bloom Energy said it had spoken with Oracle, and that the company "remains committed to Project Jupiter and its contract with Bloom to deliver 2.4 GW of fuel cell capacity." Bloom said it expected to execute on Oracle's planned timeline. So every party says the same thing about commitment. Oracle is staying as tenant. Blue Owl's commitments are unchanged. Bloom's contract is intact. None of them controls, on its own, when gas reaches the site. That resolves the opening contradiction. Oracle can call the project on schedule and file the notice at the same time. The notice is about who waits for money, not whether the campus gets built. The date to watch is February 1, 2027, the new in-service target for the Green Chile pipeline. It still depends on rights-of-way across state land that have already been denied. If the pipeline arrives on that date, the biggest named obstacle to 2028 falls away. Blue Owl moves toward its higher return, and the rent deferral may never be used. If it slips again, Oracle can seek to defer rent, but only if Stack agrees the delay qualifies. In that case, Blue Owl waits longer at its lower yield, and the banks holding the loans carry more of the wait.