> ## Content Index > Fetch the complete content index at: https://blog.financely.io/llms.txt > Use this file to discover other available public pages before exploring further. # The Data Center Utility Power Agreement: What Lenders Review Before Funding Construction - URL: https://blog.financely.io/data-center-utility-power-agreement-what-lenders-review/ - Published: 2026-11-10T14:08:41.000Z - Updated: 2026-11-10T14:08:41.000Z - Description: Before a lender funds a data center, it reads the utility power agreement as closely as the lease. Here is what it checks. - Author: Financely Debt Advisors - Tags: Data Center Finance, Data Center Power & Infrastructure Finance, Project Finance Data center developers tend to talk about tenants. Lenders tend to talk about power. A signed lease with a strong hyperscale or cloud tenant is the core of the credit, but most leases are only as good as the developer's ability to deliver contracted megawatts by a date. That depends on a document many sponsors treat as an engineering matter: the electric service or power supply agreement with the utility. This guide explains what a construction or term lender reads in that agreement and how to prepare for it. ## Why power is now a credit question Demand for data center power has grown faster than grid capacity in many markets. The [International Energy Agency (Energy and AI, 2025)](https://www.iea.org/reports/energy-and-ai?ref=blog.financely.io) projects global data center electricity demand to more than double by 2030, and utilities in several regions have responded with dedicated large-load tariffs. In Ohio, for example, the Public Utilities Commission of Ohio approved a data center tariff for AEP Ohio in July 2025, and the resulting [AEP Ohio data center tariff](https://www.aepohio.com/company/about/rates/data-center-tariff/?ref=blog.financely.io) includes minimum demand charges for large new loads, alongside contract term, collateral and exit requirements. The lesson for developers is not specific to Ohio. Large-load service increasingly comes with long commitments, credit support and fixed charges. Those terms change the project's cost base and risk profile, so lenders now underwrite them alongside the lease. ## What lenders check in the power agreement ### 1\. Contracted capacity and the ramp schedule How many megawatts are contracted, at which substation, and on what ramp? Lenders compare the ramp with the lease delivery schedule building by building. A lease that requires a full hall to be ready before the utility can deliver the capacity is a mismatch the lender will find. ### 2\. Energisation dates and what happens if they slip Is the energisation date firm, conditional on network upgrades, or best efforts? What remedies does the developer have if the utility is late? Lenders model a delayed energisation case and test it against the tenant's delay remedies and termination rights in the lease. ### 3\. Network upgrades and who pays Many connections depend on new transmission or substation works. The agreement should show what upgrades are required, the schedule, cost responsibility and any contribution or deposit the developer must fund. These amounts belong in sources and uses. See [financing grid upgrade contributions for large-load customers](https://blog.financely.io/financing-grid-upgrade-contributions-for-large-load-customers/) for funding options. ### 4\. Minimum demand and fixed charges If the tariff requires payment for a minimum share of contracted capacity, the project carries that cost during ramp-up, whether or not the tenant has moved in. Lenders want to see that cost reflected in the model and, ideally, passed through to the tenant in the lease. ### 5\. Collateral and credit support Utilities may require collateral from large-load customers, often scaled to the customer's credit rating. That is a real funding need. Lenders will ask how it is provided, whether it sits with the project company or the sponsor, and whether it can be released over time. ### 6\. Term, exit and assignment Long minimum terms and exit payments protect the utility. Lenders check that the agreement can be assigned or collaterally assigned to them, that step-in rights are available, and that exit obligations do not outlast the lease in a way that leaves the project exposed. ## Aligning the lease and the power agreement The cleanest financings align three documents: the power agreement, the construction contract and the lease. Lenders map them against each other on one timeline. Common fixes include: - Lease delivery dates that are tied to energisation, or that give the developer relief for utility delay. - Pass-through of minimum demand and fixed charges to the tenant where commercially possible. - Phasing that matches each building to a confirmed tranche of capacity. - Construction contracts with completion dates that leave a buffer before the lease deadline. For how lenders size construction debt once these pieces line up, see [data center construction loans](https://www.financely-group.com/data-center-construction-loans?ref=blog.financely.io) and [data center private credit financing](https://blog.financely.io/data-center-private-credit-financing/). ## Bridging power and on-site generation Where grid supply is late, some developers add on-site generation or temporary supply. Lenders can finance this, but it brings its own diligence: fuel supply, air permits, emissions limits, equipment availability and the cost per unit of power compared with the tariff. It is a bridge, not a substitute for a firm connection, in most credit committees' view. ## How the power terms show up in the model - A delayed energisation case, with rent commencement pushed back and fixed charges still running. - Minimum demand charges during ramp-up, net of any tenant pass-through. - Collateral funding and release assumptions. - Upgrade contributions and their timing. - Sensitivity of coverage ratios to each of the above. A model that ignores these items is a model the lender will rebuild. See [independent model review for project finance](https://www.financely-group.com/financial-model-audit--independent-model-review-for-project-finance-commercial-real-estate-and-structured-credit?ref=blog.financely.io). ## What to put in the lender file - The executed or final-form electric service agreement, tariff schedule and any facilities or interconnection agreements. - The utility's load study or system impact study and the upgrade schedule. - A one-page timeline mapping power, construction and lease milestones. - Evidence of collateral posted or the plan to post it. - The lease, construction contract, budget and contingency. - An independent engineer's view on power delivery where available. ## Phasing a campus against confirmed capacity Large campuses are rarely energised in one step. Utilities often deliver capacity in tranches as upgrades complete, and leases are often signed building by building. Lenders are comfortable with that, provided each tranche of debt is matched to a confirmed tranche of power and a signed or committed lease. A common structure is a facility that funds the first building on confirmed capacity, with later buildings drawn only when the next tranche of power and the next lease are in place. This protects the lender from funding a shell that cannot be powered, and it protects the sponsor from paying for debt it cannot yet use. Developers who present a phased plan, with a clear table of buildings, megawatts, energisation dates and lease status, get to a term sheet faster than those who present the campus as a single number. ## How Financely helps Financely advises data center developers and owners on financing structure, aligns the power, construction and lease story into a lender-ready package, and runs the process with banks, infrastructure lenders and private credit. Financely is an advisor and arranger and does not lend or hold funds. For the full range of power, storage and digital infrastructure work, see [energy and data center project finance advisory](https://www.financely-group.com/energy-project-finance-advisory?ref=blog.financely.io). ## Frequently Asked Questions ### Why does a lender care about the utility agreement if there is a signed lease? Because the lease usually depends on delivering power by a date. If energisation slips, the tenant may have delay remedies or termination rights, so the utility agreement is part of the revenue case. ### What is a minimum demand charge and why does it matter? Some large-load tariffs require the customer to pay for a minimum share of contracted capacity whether or not it is used. That is a fixed cost the project carries during ramp-up, and lenders model it in the downside. ### Will the utility require collateral from the data center? Many large-load tariffs and service agreements require collateral or credit support, with the amount often depending on the customer credit rating. That collateral is part of the project funding need. ### Can on-site generation replace a utility connection for financing purposes? It can bridge or supplement grid supply, but lenders then underwrite fuel, permits, emissions and equipment risk as well. Most lenders still want a clear route to permanent grid supply. ### Does Financely provide construction finance for data centers? No. Financely is an advisor and arranger. It structures the financing and runs the process with banks, infrastructure lenders and private credit, which make the credit decisions. ## Next Step If you are preparing a financing like this, send a short summary of the transaction, the numbers and the timetable. [Request a free estimate](https://www.financely-group.com/requestaquote?ref=blog.financely.io). If you are ready to begin work straight away, you can also [start your engagement](https://www.financely.io/start-your-engagement?ref=blog.financely.io). *Financely acts as an advisor and arranger, not a lender, issuer or guarantor, and does not hold client funds. Financing is subject to lender appetite, due diligence, compliance approval and documentation. This article is general information, not legal, tax or accounting advice.*