Fermi America signs 200 MW Electric Service Agreement with Xcel Energy’s SPS
Fermi America has signed a definitive Electric Service Agreement (ESA) with Southwestern Public Service Company (SPS), a subsidiary of Xcel Energy, to deliver up to 200 megawatts (MW) of electrical capacity to its Project Matador Campus in Amarillo, Texas. Under the deal, SPS will start supplying 86 MW in January 2026, with capacity ramping to 200 MW over time.
For context, an ESA is a contract with a utility to supply power at agreed terms and tariffs. The power will be delivered via SPS’s 115-kilovolt (kV) high-voltage transmission system, which is the backbone infrastructure that moves bulk electricity reliably to large users like data centres.
Why this matters for Project Matador’s AI ambitions
Project Matador is positioned as an 11 GW behind-the-meter campus intended to support hyperscale artificial intelligence and computing. Today’s agreement provides a firm, utility-grade pillar in that power stack. It is not the whole story, but it is a meaningful step from intent to execution.
The 86 MW starting in January 2026 suggests Fermi expects to energise initial loads soon after – a visible milestone for a company building at gigawatt scale. Management framed the deal as reliable and cost-effective, and as the start of a growing relationship with Xcel Energy. That should help de-risk early operations as Fermi layers in additional on-site sources over time.
Early infrastructure signals: grid tie and gas pipeline
Alongside the ESA, Fermi highlighted that a natural gas pipeline is being laid at the Matador campus. That fits the company’s plan to integrate multiple sources – utility grid power, a combined-cycle natural gas project, clean new nuclear, solar and batteries – to deliver highly redundant power for AI workloads.
In short, the campus is being prepared for a hybrid model: near-term grid power from SPS plus on-site generation as projects are built out. The 115 kV connection should offer reliability for those early phases.
Key numbers at a glance
| Power under ESA | Up to 200 MW |
| Initial delivery | 86 MW starting January 2026 |
| Transmission | 115 kV SPS high-voltage system |
| Campus scale (planned) | 11 GW Project Matador |
| Location | Amarillo, Texas |
| Provider | Southwestern Public Service Company (Xcel Energy subsidiary) |
| On-site works | Natural gas pipeline being laid |
Commercial terms: what’s disclosed and what’s not
Investors should note what the RNS does and does not say:
- Price per MWh and tariff details – not disclosed.
- Contract term length, step-up timetable to 200 MW, and any curtailment provisions – not disclosed.
- Capital costs for interconnection and on-site infrastructure – not disclosed.
- Customer contracts for the AI compute capacity the power will serve – not disclosed.
That does not diminish the importance of securing utility power, but it does mean the economics and cash-flow profile remain to be fleshed out in future updates.
The scale question: 200 MW versus an 11 GW vision
Let’s keep the proportions in view. The campus is pitched at 11 GW of highly redundant power. Today’s ESA covers up to 200 MW – a small but meaningful first slice. For an AI campus, that is enough to bootstrap significant compute while the larger build-out proceeds.
The company’s playbook appears phased: bring in dependable grid capacity now, add gas-fired combined-cycle capacity, then layer nuclear, solar and storage. If executed, that mix can balance cost, reliability and carbon profile over time. The ESA is the near-term anchor that allows the rest to line up.
Why partner with Xcel Energy’s SPS
Xcel Energy operates across eight US states and emphasises reliable, resilient and sustainable energy. SPS is its regional utility for Texas-New Mexico, and the 115 kV system provides a proven path to serve large loads. The collaboration supports Xcel’s stated focus on meeting growing energy needs in the Texas Panhandle while helping Fermi keep schedules and budgets on track.
Management’s messaging and intent
Fermi’s Chief Power Officer, Larry Kellerman, called the agreement another example of converting intent into execution. Co-founder and CEO Toby Neugebauer linked the partnership to demonstrating that reliable, large-scale AI energy can be delivered on time and on budget. From Xcel’s side, Adrian Rodriguez expressed support for meeting the region’s rising energy needs.
The tone is confident and partnership-led, which is exactly what you want when scaling power for compute infrastructure. Still, the proof will be in energisation dates and ramp milestones.
Risks and milestones to watch next
- Energisation of the first 86 MW in January 2026 – timing and any commissioning slippage.
- Clearer schedule for ramping from 86 MW to 200 MW, including interconnection works.
- Further disclosures on on-site generation – combined-cycle gas, nuclear, solar and batteries – and their sequencing.
- Commercial details of the ESA (price, term, curtailment), which will drive project economics – currently not disclosed.
- Evidence of compute customers and utilisation plans for the secured power – not disclosed.
The release also includes standard forward-looking statements language. Translation: timelines and outcomes could vary with permitting, construction, grid constraints and market conditions.
My take: a solid de-risking step, with economics still to come
This is a positive operational milestone. Securing up to 200 MW from a large regulated utility reduces early-stage execution risk and gives Fermi a credible power runway into 2026. The 86 MW starting in January 2026 is a near-term, testable marker.
The main drawback is the lack of commercial detail. Without price and term, it is hard to gauge margin profile or competitiveness versus alternative power strategies. And while 200 MW is useful, it is a small slice of an 11 GW vision – investors will want to see additional power blocks and on-site generation progress through 2026.
Net-net: encouraging for delivery momentum, sensible for an AI-focused campus, and supportive of the narrative that Fermi is moving from plans to projects. The market will now focus on the January 2026 switch-on and the pace of the ramp to 200 MW, followed by updates on gas, nuclear, solar and storage integration at Project Matador.
