Chevron is Building a Massive Power Plant to Support a Microsoft AI Data Center. Here's What it Means for the Energy Stock.

Chevron will build new power generation capacity to support Microsoft’s expanding AI data center project in Texas under a 20-year agreement, according to the report. The deal enables Chevron to develop Project Kilby, a large-scale natural gas-fired plant designed to be co-located with the Microsoft facility. The project is expected to deliver about 2.67 GW of capacity when completed, described as enough to power around 2 million homes, and Chevron and partner Engine No. 1 would supply capacity in phases as Microsoft requires more energy. Chevron plans a formal Final Investment Decision by the end of this year for a project costing about $7 billion, with initial power supply targeted for 2028 and construction continuing into the 2030s. GE Vernova is expected to supply most gas turbines and electrical infrastructure, while Caterpillar’s Solar Turbines would provide additional capacity. The report says the arrangement could provide reliable electricity, reduce stress on the regional grid, and give Chevron more predictable cash flows backed by the long-term contract, targeting mid-teens returns.