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Microsoft’s ambitious plan to build one of East Africa’s largest data centers in Kenya has stalled after negotiations with the government reportedly broke down over financial guarantees and energy demands.
The proposed facility, backed by Microsoft and UAE-based AI company G42, was expected to become a cornerstone of Kenya’s digital infrastructure push. But talks slowed after Microsoft requested long-term annual commitments for data center capacity that Kenyan officials were unwilling to guarantee, according to a report by Bloomberg.
At the center of the dispute is power consumption. Kenyan President William Ruto summed up the challenge bluntly, saying the country would need to “shut off power for half the country” just to run the planned facility at full scale.
The geothermal-powered project, first announced in 2024, was slated for Olkaria, a region known for renewable energy production. The first phase alone carried a projected price tag of $1 billion and was designed as part of a broader push to position Kenya as a regional technology and AI infrastructure hub.
The scale of the proposal highlights a growing global issue tied to the AI boom: electricity. Modern AI data centers consume enormous amounts of power due to the computational demands of training and running large language models, cloud services, and enterprise AI systems. Microsoft has been rapidly expanding its global infrastructure footprint, reportedly adding roughly a gigawatt of data center capacity every three months to keep pace with demand.
Kenya currently has an installed electricity capacity of around 3,000 megawatts, making a potential 1 gigawatt facility a massive strain on the national grid. The government is now pushing a broader energy expansion strategy aimed at increasing total national capacity to 10,000 megawatts by 2030.
Officials insist the project is not dead. Kenya’s Ministry of Information says discussions are continuing and that the scale of the facility simply requires additional restructuring before agreements can move forward.
The project also reflects how geopolitical and economic interests are increasingly converging around AI infrastructure. Microsoft previously invested $1.5 billion into G42 as part of a wider strategy to expand AI operations beyond the Middle East and strengthen its international compute footprint.
At the same time, Kenya’s proposed infrastructure financing strategy has drawn criticism domestically. Parts of the government’s broader KSh 5 trillion infrastructure proposal rely on debt mechanisms and potential state asset sales, prompting concerns from oversight officials about long-term financial sustainability and the burden placed on future generations.
