Xcel rethinks land sale contracts after buyer flipped $8M data center property to Amazon for $73M

Xcel Energy is considering new financial protections for utility customers after it sold land for $7.7 million to a company that flipped it to Amazon for $73.5 million for a data center.

The deal has raised new questions about utilities' responsibilities as tech companies are now flocking to Minnesota with plans for large-scale server farms that need huge amounts of electricity.

Xcel had convinced Minnesota utility regulators that the original price for 348 acres of land in Becker, Minn., was fair and that it would return the profit to its ratepayers in the form of a bill credit. It also said the initial deal would bring a huge data center that would be lucrative for the company and customers by selling more energy.

But the resale just months later drew criticism from consumer advocates who felt Xcel could have won a better deal and been more transparent. The Public Utilities Commission (PUC) also questioned the details of the transactions, reported by the Minnesota Star Tribune.

In response, Xcel told the PUC on Monday that it could, in the future, require land buyers to share profits if they quickly flip a property. Xcel said it could also update the price if a buyer waits to close for a long period of time by exercising contract options. In addition, the company said it could use a competitive bidding process to sell land, which it chose not to do in the Becker deal.

“While these strategies and contractual provisions could impact the number of bidders and/or pricing for a parcel of land, we think the tradeoff associated with these tools may make sense given the current state of market volatility,” wrote Thomas Bailey, Xcel’s assistant vice president of commercial and industrial solutions, in a letter to the PUC.

As Xcel considers revamping how it sells land, the episode is evidence of how regulators and utility companies are learning on the fly how to handle challenges created by this influx of data centers — and the enormous financial stakes involved.

“We still have questions about how the purchase price could have increased almost by a factor of 10 in such a short time,” said Annie Levenson-Falk, executive director of the nonprofit Citizens Utility Board of Minnesota. “That said, Xcel has suggested some good options that should be considered to make this kind of situation less likely in the future.”

Xcel first struck a deal in 2022 to sell land near its Sherco coal plant in Becker to Elk River Technologies.

In September of that year, Xcel asked the PUC to approve a roughly $7.7 million sale, which matched an independent appraisal. Xcel also asked that the profit be returned to customers in Minnesota and the Dakotas.

Xcel’s contract stipulated Elk River Technologies was buying the property “with the sole intent of developing it for data center use.” Xcel estimated the project at $1 billion.

Xcel and its supporters said a data center project would bring jobs and tax revenue to the Becker area, easing the pain of the planned shutdown of Xcel’s coal plant in 2030. A data center would also bring in cash for Xcel and could potentially reduce bills for customers.

Nobody opposed the sale at the PUC, which voted to approve the transaction in March 2023.

At the time of the vote, however, the PUC did not know Elk River Technologies planned to sell the land to another company building a data center.

It also did not know the parent company of Elk River Technologies, which does not operate data centers. Elk River Technologies is a subsidiary of Diode Ventures and the Kansas-based engineering and construction firm Black & Veatch.

Neither Xcel nor Black & Veatch publicly disclosed that fact until later.

The deal with Xcel closed in April 2024. Elk River Technologies sold to Amazon about seven months later for nearly 10 times the price.

Local officials were surprised at the markup, and said they felt Elk River Technologies made no improvements to the land.

Black & Veatch told the Minnesota Star Tribune in January that its subsidiaries spent years developing the site, spending money on infrastructure work and doing other things to prep it for a potential data center buyer. That explains the jump in price, the company said.

After the Minnesota Star Tribune published an article about the land sales in mid-January, the PUC asked Xcel to answer a series of questions about the transaction.

The commission wanted Xcel to share any lessons learned that would protect customers and maximize the sale price of any future land deals.

On Monday, Xcel outlined the potential changes to its contracting and sales strategies.

Notably, the company said it could use a competitive bidding process. Xcel had opposed the idea in 2023 when suggested by the Minnesota Department of Commerce for sale of other surplus land at Sherco.

Xcel instead wanted buyers that would develop projects like a data center to benefit its customers and the area in more ways than just profit from the land sale. The highest bidder might not build something desirable, Xcel said.

That could still happen, Xcel said on Monday, but it said the tradeoff could be worth it.

The PUC asked Xcel if the company or any of its executives had a relationship with Black & Veatch. Xcel said that neither had “financial ownership interest” such as stocks or debt interest in the firm.

Xcel said it has used Black & Veatch as a consultant from time to time. That includes work in the past for Xcel at the Sherco coal plant.

Xcel also explained in greater detail how it believes land around Sherco became so much more valuable in a short period of time.

The market for data centers “changed dramatically” between when it first entered an option agreement with Elk River Technologies in 2022 and when the company sold the property in 2024, Xcel said.

Demand for these server farms spiked, Xcel said, because of sudden growth in the artificial intelligence sector that created a need for more data storage and processing. AI platforms like ChatGPT, which use huge amounts of energy, launched after its initial contract with Elk River Technologies.

Xcel called the situation “unforeseeable.”

“Neither Xcel Energy nor others could have reasonably predicted the market volatility responsible for the sizeable increase in demand for data-center-suitable land,” Bailey wrote.

It’s clear, at least now, that land near the Sherco coal plant is prime real estate for data center companies.

In February 2024, Xcel sold a smaller 295-acre property in Becker directly to Microsoft for a data center project. The price was $17.7 million. That sale did not need PUC approval and the cash went back to the company because the property was regulated differently, according to Xcel.

There is significant demand for land near electric infrastructure like substations and big power lines.

Xcel is building one of the largest solar farms in the country on site, along with electric infrastructure, and is planning a power line to tap renewable electricity in southwest Minnesota. Xcel also proposed a new gas plant on the other end of that transmission project.