National Grid, the UK electricity and gas utility, is making a big bet on the data center boom in the United States. The company announced a $1.75 billion investment to acquire a 35% stake in Joulent, a venture that will help build a massive gas-fired power plant in West Texas to supply a Microsoft-operated data center campus.
The deal sits inside National Grid Ventures, the company's higher-risk, higher-return business unit. It helps fund Joulent's first project, called "Kilby," a 2.67-gigawatt gas-fired plant being developed in partnership with Chevron in a 50/50 joint venture. The plant's output is slated to go to a Microsoft campus under a 20-year power purchase agreement (PPA), a long-term contract that makes huge, capital-intensive projects easier to finance.
Why a UK utility is chasing US data center power
Data centers are one of the fastest-growing sources of electricity demand globally. National Grid notes that data center electricity demand rose 17% in 2025, compared with just 3% for overall global electricity demand. The utility says it is working to connect more than 10 gigawatts of data center demand across the UK and US over the next five years.
This deal is part of a broader trend: tech giants like Microsoft, Amazon, and Google are signing long-term power deals to secure reliable electricity for their expanding cloud and AI operations. Because data centers run 24/7, they need baseload power, and natural gas plants are often the most practical option for large-scale, on-demand electricity in the near term.
For National Grid, the investment diversifies its business beyond regulated electricity and gas networks in the UK and US Northeast. The company already has a presence in US energy infrastructure through its National Grid Ventures arm, which develops and operates assets like interconnectors, renewable generation, and now data center power projects.
What it means for investors: higher returns, longer wait
National Grid's core regulated networks typically earn returns on equity (ROE) of about 9% to 10%, as noted by JPMorgan. Those returns are relatively predictable because regulators set the allowed profit margins. Ventures projects, by contrast, target higher returns because they carry more project and execution risk.
That risk shows up in how the market values the stock. Investors generally demand a bigger "risk premium" for unregulated build-and-operate assets, especially when most of the cash flow arrives years in the future. National Grid expects a final investment decision on Kilby by the end of 2026, first power in 2028, and free-cash-flow positive economics in the early 2030s. That long timeline helps explain why National Grid's shares dipped 1.4% after the announcement, even though the company says the investment is incremental to its at least £70 billion plan through fiscal year 2031 and funded from existing balance-sheet capacity.
For everyday investors, the key takeaway is that National Grid is shifting part of its business model from a steady, regulated utility to a more project-driven infrastructure developer. That can offer higher growth potential but also introduces more uncertainty about when cash will actually flow back to shareholders. The 20-year contract with Microsoft provides some revenue visibility, but construction delays, cost overruns, or changes in energy markets could still affect returns.
Investors should also consider the broader context: data center power demand is surging, but so is competition to supply it. Other utilities and independent power producers are also chasing these deals, which could pressure margins over time. National Grid's existing relationships and balance sheet strength give it an edge, but the project is still years away from generating meaningful cash.
For comparison, other infrastructure-focused companies are also making big moves in the logistics and energy space. For example, Segro recently formed a £3 billion joint venture to develop UK logistics parks, showing how capital is flowing into real assets tied to structural demand trends.
What to watch next
Investors will want to track progress on the Kilby project's final investment decision, expected by the end of 2026. Any delays or cost increases could weigh on National Grid's shares. Conversely, if the project stays on schedule and on budget, it could validate the company's strategy and potentially lead to more data center power deals.
Also worth watching: how National Grid balances its regulated and unregulated investments. The company's core networks still generate the bulk of its earnings and dividends, but the Ventures unit is growing. If data center demand continues to surge, National Grid could become a more significant player in this space, but that would also mean more exposure to project risk.
For now, the market is taking a cautious view, as reflected in the slight share price decline. But with a 20-year contract from one of the world's largest tech companies, the project has a strong anchor customer. The question is whether National Grid can execute on the build-out and deliver the returns it promises.
