Negotiations over guaranteed capacity payments have put a Microsoft data center project in East Africa on hold, according to people briefed on the discussions, Bloomberg News reported. The initiative, launched in May 2024 when Microsoft and Abu Dhabi-based AI firm G42 announced a joint $1 billion investment in a Kenyan facility, aimed to broaden cloud-computing services across the region.
The project was unveiled during Kenyan President William Ruto's state visit to Washington under the Biden administration. The planned facility was designed to run entirely on geothermal energy and to provide access to Microsoft's Azure cloud through a dedicated region for East Africa.
Microsoft and G42 sought a formal commitment from the Kenyan government to purchase a specified amount of capacity each year as part of the project structure. Talks reportedly collapsed after the government was unable to offer guarantees at the level Microsoft and G42 requested. As a result, the investors are said to be weighing whether to scale back the scope of the development.
Kenyan officials, however, indicate the matter remains active. John Tanui, principal secretary at Kenya's Ministry of Information, told Bloomberg in an interview that the project is "not failed or withdrawn." He said the scale Microsoft and its partner originally proposed will require further structuring and that power requirements for the facility remain under discussion.
The parties involved did not provide immediate comment in response to requests for clarification, and the reporting on the status of negotiations could not be independently verified at the time of publication.
Context and implications
The venture combined a major public-private element - an international technology company and a foreign AI investor seeking to anchor a cloud region in Kenya - with an intent to rely on local geothermal resources for power. The payment guarantees Microsoft sought were positioned as part of the project’s commercial viability; without them, both capacity planning and financing structures face uncertainty.
Kenya’s continued engagement in talks suggests the government is exploring alternatives to meet the project’s commercial requirements, while discussions over power needs indicate technical and infrastructure issues are still being resolved.
Quotes
"It is not failed or withdrawn," John Tanui, principal secretary at Kenya's Ministry of Information, said, according to Bloomberg.
"The scale of the data center they wanted to do still requires some structuring," he added, noting that power requirements are still under discussion.