Projected hyperscaler capital expenditure by 2027.
AI Infrastructure Finance
Power LC Facilities for AI Data Center Expansion
Data center developers are arranging dedicated letter of credit facilities to satisfy utility, transmission and interconnection collateral requirements while preserving funded liquidity for construction.
The structure is becoming a distinct part of hyperscale infrastructure finance as utilities require substantial security before committing network upgrades, generation capacity and electric-service infrastructure.
Capital Requirements
AI Infrastructure Is Becoming a Credit Market
S&P Global Ratings expects combined capital expenditure across Alphabet, Amazon, Microsoft, Meta, Oracle and SpaceX to exceed $1.3 trillion by 2027. Power infrastructure, transmission, substations and grid capacity form a growing share of the financing requirement.
Switch syndicated performance LC facility.
TeraWulf Muskie Energy Services Agreement collateral.
Additional Muskie transmission-related collateral requirement.
Utility Credit
Power Access Requires Bankable Collateral
Utilities and transmission providers can incur substantial costs before a data center reaches full load. Interconnection studies, substations, transmission upgrades and generation commitments may all require security from the developer.
Letters of credit allow an acceptable bank to support those obligations while the sponsor retains cash for construction, equipment procurement and operating liquidity.
LC collateral supporting grid studies, queue milestones and interconnection agreements.
Credit support for electric-service agreements and utility infrastructure commitments.
Security covering substations, network upgrades and transmission construction.
Performance LCs supporting generation capacity, PPAs and contracted power obligations.
Transaction Structure
Switch Separated Power LC Capacity From Its Revolver
Switch closed a $2.6 billion syndicated performance letter of credit facility in April 2026 and expanded it to $3.5 billion in June. The facility supports power procurement, generation and transmission obligations across its data center development pipeline.
The company also expanded its corporate revolving credit facility to more than $6 billion. The separate structures preserve funded liquidity for development while dedicated banks support contingent power obligations.
| Facility | Capacity | Primary Use |
|---|---|---|
| Corporate Revolver | $6B+ | Construction liquidity, equipment, contractors, contingencies and corporate funding. |
| Performance LC Facility | $3.5B | Power procurement, transmission and generation credit support. |
Capital Efficiency
Dedicated LC Capacity Preserves Construction Liquidity
Large LC sublimits can consume availability under a corporate revolving facility. A developer with billions of dollars of power collateral requirements can therefore lose access to substantial funded capacity before construction draws occur.
Fund Construction
Preserve revolver capacity for contractors, equipment deposits, development costs and timing gaps.
Post Utility Security
Use dedicated contingent credit for interconnection, ESA, transmission and power obligations.
Recycle Capacity
Release LC utilization as utility obligations reduce and new campuses enter the development pipeline.
Unfunded LC Capacity Still Requires Full Credit Underwriting
A performance LC does not require the bank to advance the full face amount at issuance. The bank commits contingent credit and pays if a beneficiary submits a complying drawing.
The issuing bank therefore evaluates reimbursement capacity, leverage, liquidity, sponsor support, tenant commitments, project development risk, utility contracts and potential drawing exposure.
Syndicated Credit
Multi-Bank LC Facilities Support Larger Development Pipelines
A multi-billion-dollar performance LC requirement can exceed the credit hold of a single institution. Syndication distributes contingent exposure across several banks while allowing one or more approved issuers to deliver LCs to utilities and transmission counterparties.
The facility can establish aggregate commitments, beneficiary eligibility, campus sublimits, utilization procedures, accordion capacity and reimbursement mechanics under one credit agreement.
Suitable for an individual utility or project-level collateral requirement.
Issuance under an existing revolving credit facility for smaller recurring obligations.
Dedicated contingent capacity kept separate from funded corporate borrowing.
Multi-bank capacity for large multi-campus and multi-beneficiary requirements.
Related Financing
Power LC Facilities Sit Inside a Broader Infrastructure Capital Stack
AI data center sponsors may require revolving credit, construction debt, project finance, equipment financing and contingent credit simultaneously.
Financely advises on project finance, Standby Letter of Credit structuring and performance guarantee facilities for eligible infrastructure mandates.
Structure a Data Center Power LC Facility
Submit the required facility amount, campuses, utility counterparties, MW requirements, collateral schedule, existing revolver and required posting dates. Financely can assess bilateral, standalone and syndicated LC structures for eligible mandates.
Financely provides structured finance and bank-instrument advisory services. Financely is not a bank or direct lender and does not itself issue letters of credit, guarantees or commit lender capital. Facility availability, pricing, collateral requirements and issuance remain subject to applicant credit quality, KYC, AML, sanctions screening, beneficiary requirements, lender underwriting, definitive documentation and final bank approval.