Microsoft-G42 Kenya Data Centre Stalls Over Government Offtake Demands
May 11, 2026 - 7:29 am
Image by: Raimond Spekking
The company requested the Kenyan government for a guaranteed annual capacity offtake. The government did not commit at the level Microsoft requested, leading to broken down talks; the project is not formally cancelled.
A $1bn Microsoft data-centre project in Kenya, structured as a partnership with UAE-based G42, has stalled after the two companies failed to agree on commercial terms with the Kenyan government, according to Bloomberg.
The sticking point revolves around offtake, where Microsoft asked for a guarantee that Kenyan public bodies would purchase a defined amount of computing capacity each year.
The Project Announcement:
The project was announced in May 2024 and positioned as a flagship of Microsoft’s East Africa expansion: a geothermal-powered facility supplying Azure to government, enterprise, and developer customers across the region, with G42 as a strategic co-investor. The $1bn budget was split between Microsoft and G42, with Kenya providing land, power purchase terms, and regulatory facilitation. Geothermal power, abundant and cheap in Kenya, formed the core of the pitch.
Current Status:
Microsoft has not officially cancelled the project. The Kenyan Ministry of Information confirmed to local press that the project remains active:
“It is not failed or withdrawn.”
Bloomberg’s sources suggest a delay, not a death; the companies might resize the facility to a smaller footprint without requiring the same level of guaranteed offtake.
The Ofwatake Conundrum:
The unusual demand for an offtake guarantee stands out. Hyperscalers typically do not request such commitments from host governments, as evidenced by similar situations involving Western utilities. These utilities enter into long-term capacity contracts that underpin builds in new locations.
Kenya’s government faces a tight fiscal climate and IMF program conditions, making it challenging to commit to multi-year compute contracts while prioritizing health, education, and infrastructure spending.
Other Considerations:
While politics play a role, the primary issue is structural. G42’s position is notable; having made significant capacity announcements in the US, Italy, and France over the past year, the UAE-backed firm continues its global build strategy.
Since the initial stall, both Microsoft and G42 have recognized the need to adapt to the realities of Kenya's fiscal climate and the global hyperscale landscape. In a joint statement, the companies announced they are exploring a reduced facility size, focusing on a more flexible model that allows for partnerships with local businesses and governments. This new approach aims to leverage Kenya's robust geothermal energy while navigating the challenges of guaranteed offtake commitments. The resized project could provide a more sustainable and mutually beneficial partnership, positioning Kenya as a regional hub for data centre innovation. This shift in strategy underscores the evolving nature of data centre development, where flexibility and local collaboration are increasingly crucial for success. By downsizing and reevaluating their partnership, Microsoft and G42 demonstrate a commitment to Kenya's future while navigating the complexities of the global tech landscape. Read the full article