SB Energy Grants OpenAI $5.5 Billion in Warrants for 20-Year Lease
SB Energy, a SoftBank-owned power and data center developer, has provided OpenAI with warrants worth approximately $5.5 billion to secure a 20-year lease at a planned campus in southern Ohio. The arrangement, reported by The Wall Street Journal, sees SB Energy as the issuer and OpenAI as the recipient, making it a landlord-tenant rather than a customer-stakeholder relationship.
These instruments, initially granted in January with an estimated value of $3.6 billion, increased significantly to $5.5 billion by June due to rising equity values rather than any direct contribution from OpenAI. The warrants essentially secure a signature on a lengthy lease for OpenAI at the 10-gigawatt Ohio site, scheduled to begin operations in 2028.
This strategic move follows similar joint investments by both companies, including a $500 million investment each into SB Energy, which is also planning an IPO targeting between $5 billion and $7 billion. OpenAI is expected to maintain a single-digit percentage stake post-listing, transforming from a tenant to a shareholder at the same time as public investors assess the company’s value.
Nvidia is also reportedly considering a substantial investment in SB Energy for the Ohio project, further emphasizing the circular nature of this arrangement. Each entity, including Nvidia, SoftBank, and OpenAI, holds financial positions tied to the same infrastructure buildout, with valuations contingent on continued commitment from all sides.
SoftBank’s overall commitment across OpenAI equity, joint investments in SB Energy, and Stargate now exceeds $64 billion. The rationale is to own the model layer through OpenAI and the physical layer through SB Energy, ensuring both remain functional.
This pattern extends beyond these companies; Nvidia has been negotiating terms to guarantee $250 billion of OpenAI data center debt for a project in Ohio, while lenders have become more cautious about financing in this sector. SoftBank’s fundraising efforts have also faced challenges, as evidenced by its $40 billion bridge facility signed in March to fund OpenAI commitments.
Warrants, however, offer a strategic solution: they are cost-neutral today, with SB Energy paying only if its equity appreciates. Any dilution is borne by those who invest in the IPO, rather than impacting the current balance sheet. There’s also a question of risk allocation; the 20-year lease acts as a liability for OpenAI and an asset for SB Energy, with OpenAI benefiting from the value created by its signature.