PPL, Blackstone JV to Build Natural Gas Plant for Data Center Support

PPL Corporation PPL announced that it has formed a joint venture (“JV”) with Blackstone Infrastructure to build, own and operate new gas-fired, combined-cycle generation stations. It will be used to power data centers under long-term energy services agreements (“ESAs”).

There’s a strong U.S. policy push for domestic manufacturing and reshoring of tech infrastructure, including semiconductor and AI data facilities. Inflationary pressures and aging infrastructure are contributing to rising electricity prices across many U.S. markets. Flexible, localized generation capacity (like that planned by PPL and Blackstone) can help stabilize costs for large consumers and reduce dependence on volatile wholesale markets. 

The United States is undergoing a historic investment cycle in infrastructure due to federal programs like the Infrastructure Investment and Jobs Act and the Inflation Reduction Act. These policies encourage public-private partnerships, with a focus on clean energy, grid modernization and tech-enabled infrastructure.

Key Highlights of PPL-Blackstone JV

The JV targets areas of high data center interest and aims to create front-of-the-meter power that sits atop the Marcellus and Utica shale basins and can swiftly connect to significant, available gas pipeline capacity.

The JV intends to sign long-term energy services contracts that are controlled to protect the businesses from fluctuations in merchant energy and capacity prices. The successful completion of ESAs using hyperscalers will be necessary for the construction of new natural gas facilities. Although no ESA with hyperscalers has been signed as of yet, the JV has obtained many land parcels to facilitate this new generation buildout and is actively interacting with landowners, natural gas pipeline providers and turbine makers.

PPL owns 51% of the JV interest, with Blackstone Infrastructure owning 49%. The parties will ratably share JV expenses and distributions. The newly formed entity does not include PPL Electric Utilities or PPL's other regulated subsidiaries.

PPL’s Focus on Expanding Data Center Demand

Data center interest has reached more than 60 gigawatts (GW) of possible projects inside PPL Electric Utilities' service zone in Pennsylvania alone, with over 13 GW in advanced development stages. In the next five to six years, PPL Electric Utilities anticipates a 6 GW generation gap in its service area if all 13 GW come online. 

If natural gas combined-cycle units are utilized to meet this need, it would amount to an approximately $15 billion investment need. PPL anticipates that current independent power producers, the recently announced joint venture, and, if approved, PPL Electric Utilities will construct this generation.

Utilities' Potential to Gain From Data Center Demand

Data center market is projected to see rapid expansion due to increasing artificial intelligence workloads. According to an Arizton Advisory & Intelligence report, the U.S. data center market size is expected to reach $308.83 billion by 2030.

Dominion Energy D is experiencing commercial load growth, driven by the demand from data centers. The company has nearly 40 GW of data center capacity at various stages of development, including approximately 10 GW of capacity contracted under electric service agreements.

D’s long-term (three to five-year) earnings growth rate is 13.59%. The Zacks Consensus Estimate for 2025 earnings per share (EPS) indicates a year-over-year increase of 22.4%.

The Southern Company SO is significantly benefiting from the increased demand for data centers. Southern Company has a substantial pipeline of potential data center customers, exceeding 50 GW of incremental load, with a significant portion from Georgia Power.

SO’s long-term earnings growth rate is 6.55%. The Zacks Consensus Estimate for 2025 EPS indicates a year-over-year increase of 5.4%.

NRG Energy NRG has entered into Letters of Intent with two leading data center developers, Menlo Equities and PowLan. Targeting 400 MW of retail supply in the initial phase, these arrangements have the potential to scale to 6.5 GW, with work expected to start in 2026.

NRG’s long-term earnings growth rate is 16.2%. The Zacks Consensus Estimate for 2025 EPS indicates a year-over-year increase of 17%.

PPL’s Stock Price Performance

In the past month, shares of PPL have risen 5.7% against the industry’s 1.2% decline.

PPL’s Zacks Rank

The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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This article originally published on Zacks Investment Research (zacks.com).

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