Fermi Inc., the developer of the Project Matador AI campus in the Texas Panhandle, said on November 12 that an undisclosed investment-grade hyperscaler had committed about $200 million to advance 600 megawatts of power capacity at the site. Its quarterly report, filed the same day, describes the underlying deal as a non-binding letter of intent signed November 10 for about 600 megawatts of powered land, subject to definitive documentation.
In connection with the letter, Fermi and the hyperscaler entered into a $200 million prepayment agreement and a $15 million early construction and site development agreement. Chief Executive Lee McIntire said in the earnings release that the customer “has signed up for 600 megawatts.” A risk factor added in the 10-Q says there is no guarantee that a definitive lease will be signed, or that it will carry the letter’s terms.
The letter was signed on the day Fermi’s first tenant lease was terminated. Fermi entered into that build-to-suit lease with a TensorWave subsidiary on August 9 for a 222-megawatt facility and expected about $6.5 billion in revenue from it over 15 years, according to its previous quarterly report. The lease was to take effect only once closing conditions were met or waived, including board approvals and Fermi obtaining project-level financing.
The October 31 closing date passed without an extension, and the lease was terminated on November 10 “in accordance with its terms.” The release says an AMD credit support agreement associated with TensorWave has also been terminated. Neither the filing nor the release gives a reason.
Fermi’s ground lease with the Texas Tech University System lets the university terminate it if Fermi has not received a notice to proceed with vertical construction by December 31, 2026. Issuing the notice requires, among other things, a signed lease with a first-phase tenant for at least 200 megawatts, a condition the 10-Q says “has not been satisfied.” Fermi says it is discussing an extension with the university and would lose its rights to the site if the lease were terminated. Chancellor Brandon Creighton said in a statement that Texas Tech “remains firmly committed to the success of Project Matador.”
Fermi must prepay a high-voltage equipment loan, with $91.5 million outstanding, if it has not delivered an approved customer agreement by December 31. Its $444.9 million turbine loan goes into default if Fermi has not closed fully committed financing for at least 400 megawatts of first-phase generation by February 10, 2027, which it says it has not yet done. Fermi paid $25 million in fees for an October 9 amendment to that loan, which removed higher principal payments it would have owed without a lease or offtake deal for at least 400 megawatts by November 10.
Fermi reported a third-quarter net loss of $141.6 million and ended September with $315.5 million in cash and restricted cash and $999.9 million in debt. It expects $2 billion to $3 billion in capital spending over the next 12 months. Management found conditions that raised substantial doubt about its ability to continue as a going concern, then concluded that its plans, including timing spending to the signing of tenant agreements, alleviate that doubt.
In updated risk factors, Fermi says public opposition to data center development has increased. In November, voters in numerous jurisdictions approved local ballot measures restricting it, and candidates who campaigned on such restrictions won statewide office in several states, including Texas, the filing says. Another update says some lenders are reducing or eliminating funding for data center and power infrastructure projects, which could delay Fermi’s financing or raise its cost.
Sources: Fermi (earnings release), Fermi (Q3 10-Q), Fermi (Q2 10-Q)
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By the Control Plane Editorial Team