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Black Hills Corp has signed a contract running to 2048 to power a Google data center, requiring $1.8 billion of new natural gas generation built by 2029. Google has already advanced $399 million for long-lead equipment. Construction orders for gas turbines and related hardware will flow to a small group of heavy industrial manufacturers, not to Black Hills itself.
Source: GlobeNewswire ↗
Black Hills has already received $399 million from Google to procure long-lead equipment, meaning turbine orders are imminent or already placed. The company must build 564 MW of nameplate gas generation at an existing site by 2027, creating a hard deadline that compresses the procurement window into roughly 12 to 18 months. Gas turbine manufacturing is highly concentrated. A small number of industrial conglomerates capture the majority of utility-scale gas generation orders in North America. Because this project is structured as a non-regulated affiliate build at an existing station, Black Hills can move quickly without the multi-year regulatory lag that slows traditional utility capital spending. This is widely read as a Black Hills earnings upgrade story. But equipment suppliers absorb the capital spending first, and their order books will reflect this project before Black Hills's income statement does.
Investors see this as a transformative event for Black Hills Corp. A small regulated utility has locked in a 22-year contract. That contract adds roughly $150 million of net income by 2030. The improved earnings profile is seen as justifying a higher valuation multiple.
Why that may be wrong
Investors following this story are focused on Black Hills's 2030 earnings uplift. But the $399 million Google has already advanced is being deployed into turbine and generation equipment orders. Makers of utility-scale gas turbines will see backlog growth in the next one to two quarters. Analysts covering those companies have not yet connected that growth to this specific contract.
If Black Hills sources turbine equipment from non-US manufacturers, particularly European or Asian producers, the procurement benefit does not flow to domestic industrials. Watch Black Hills's next earnings call or any regulatory filing that names equipment vendors. If foreign suppliers are named, the transmission chain to domestic industrials breaks.
Gas turbine manufacturers already operate at high utilization rates following the post-2022 data center power demand wave. Lead times for large frame turbines now stretch to 36 to 48 months. If Black Hills cannot secure equipment within its procurement window, the construction timeline slips. The 2027 revenue start would then be delayed, and the earnings story deflates. Watch whether Black Hills confirms equipment delivery commitments at its next earnings call. A vague answer on procurement timing would suggest the 2027 start date is at risk.
When NextEra Energy accelerated its gas generation build-out from 2018 to 2020, GE's gas power division reported a multi-quarter surge in US utility orders. That surge preceded the utility's earnings improvement by roughly two to three quarters. Similarly, when data center power demand drove a wave of gas peaker construction in 2023 and 2024, turbine backlog at major industrial manufacturers expanded materially before the associated utility revenues appeared in earnings.
Black Hills Corp signs a 22-year, 2.7 GW power agreement with Google. It commits to build 564 MW of new natural gas generation by 2027 at its Cheyenne Prairie Generating Station.
Google has already advanced $399 million for long-lead equipment procurement. Black Hills must therefore place turbine and generation hardware orders within months. That timing is needed to meet the 2027 construction start and begin earning a return on invested capital.
Manufacturers of utility-scale gas turbines and combustion systems will absorb these orders into their backlogs. This is likely to happen one to two quarters before Black Hills's income statement reflects any benefit. Their order intake and backlog metrics could improve ahead of consensus estimates, which have not yet connected this contract to their revenue pipelines.
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