New Era Commits $118 Million to Power Deal, Seeks Data Center Tenants Directly

New Era Energy & Digital has tied up about $118 million to back an electricity deal for its planned data center near Odessa, Texas, and changed its development plan. It now wants to find a large tenant itself.

The decisions, disclosed in a Thursday SEC filing, put New Era more directly in charge of a project with no announced tenant. They also leave it carrying a large cash commitment before construction. The company develops data center sites that already have access to electricity.

New Era, Midland, Texas, says it has begun pursuing leases with hyperscale tenants, “rather than seeking to develop the TCDC Project through a joint venture with a data center developer.”

That is a change from the path New Era described in January, when it announced a partnership with Primary Digital Infrastructure to develop the Odessa campus together. New Era has not said what became of that arrangement. It says owning the land and having power under contract for the first phase will help it negotiate directly with prospective tenants.

New Era is seeking to lease a data center that has yet to be built to customers who need certainty about construction, power delivery and financing. Land and an electricity contract help, but New Era would still have to build the facility. It has not announced a lease or a construction funding plan.

If New Era wins a tenant on the strength of its site and power agreement, it could show that the company controlling scarce electricity can hold on to a bigger role in the project. Hyperscale tenants still need buildings delivered on schedule.

New Era says it has had to commit cash before a customer signs. It put up more than the $116 million covered by the letter of credit, and it borrowed part of that money.

The immediate obligation comes from New Era’s September agreement with Vistra affiliate Luminant ET Services. Luminant agreed to supply at least 200 megawatts and as much as 207 megawatts for the first phase of the Texas Critical Data Center campus. Power can come from Vistra’s nearby gas plant, elsewhere or the Texas grid. The agreement runs for 20 years once deliveries begin, subject to conditions that must be met before then.

To protect Luminant if New Era fails to meet its obligations, Macquarie Bank arranged a $116 million standby letter of credit in Luminant’s favor. Macquarie required New Era’s project companies to keep cash equal to at least 102 percent of that amount on deposit. At the outset, that was approximately $118.3 million: $60 million borrowed under an existing loan agreement and about $58.3 million supplied from cash the project companies already held.

That $118.3 million is set aside for the power contract, not construction. If Luminant draws on the letter of credit, New Era’s power subsidiary must repay Macquarie, with 12 percent annual interest on the amount drawn. A second New Era subsidiary guarantees that repayment, and the two are jointly liable for any amount the cash deposit does not cover.

New Era’s power subsidiary agreed to pay the bank 1 percent of the $116 million letter of credit when it was issued and a continuing fee of 2 percent a year, paid quarterly. In connection with the $60 million loan draw, New Era also gave a Macquarie affiliate the right to buy 413,055 of its shares at about $7.26 each. New Era says it expects to replace its outstanding borrowings under the loan agreement soon, without giving a date or terms.

The power deal also gives Vistra a 5 percent nonvoting stake in the project’s first phase after electricity deliveries begin. That gives the power supplier a share of the data center as well as a long-term customer. 

A direct lease could help New Era keep more of the project’s value. It could also leave the company with more responsibility for raising money, building the first phase and meeting a tenant’s timetable.