(Bloomberg) — A major Microsoft Corp. data center site in East Africa has been delayed by disagreements with the Kenyan government over the company’s request for guaranteed payments, people familiar with the matter said.

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Microsoft and its partner, Abu Dhabi-based tech conglomerate G42, had asked the government to commit to paying for a certain amount of capacity annually, the people said, asking not to be identified because the talks are private. When the government couldn’t provide the guarantees at the level Microsoft requested, the talks broke down, they said.

The group may ultimately decide to scale back the project, the people said.

Representatives for Microsoft and G42 declined to comment.

Kenya is moving ahead with the talks, and “it is not failed or withdrawn,” John Tanui, principal secretary at Kenya’s Ministry of Information, said in an interview. “The scale of the data center they wanted to do still requires some structuring,” he said. Power requirements are also still under discussion, said Tanui, who didn’t comment on the specifics.

The agreement struck in 2024 envisioned a $1 billion geothermal-powered project to dramatically increase cloud computing in the region. The group at the time had said an initial phase with a capacity of about 100 megawatts, could be operational this year. The goal was to build out to as much as 1 gigawatt.

Kenyan President William Ruto has also suggested that the energy for the project exceeded the nation’s available resources. “We would need to switch off half the country for the data center to be powered,” he said at a recent state event in Nairobi.

Ruto’s “point has not been that the project was suspended, but that Kenya must confront the scale of energy required to support next-generation digital infrastructure,” Philip Thigo, Kenya’s special envoy for technology said in an emailed statement.

Talks for a 60 megawatt project with local developer EcoCloud are continuing, one of the people said.

The site is the centerpiece of a Microsoft commitment to help Kenya build out artificial intelligence, which included job training and new software models. The project would have dramatically increased the cloud computing capabilities of the region and served as a counter to Chinese companies’ technological expansion across Africa.

The site was the first joint project with G42 after Microsoft invested $1.5 billion into the United Arab Emirates tech champion. Before that investment, G42 had agreed to divest from Chinese holdings and strip out Chinese equipment. For G42, the site was a sign of its ambition to expand outside of its home market and become a significant AI cloud developer.

Microsoft, meanwhile, has been making a global push to find computing resources for its cloud business. Brad Smith, the company’s president, positioned the Kenyan project as a sign of diplomatic strength between the US and the UAE.

When it was announced, he called the proposed project the “single biggest step to advance the availability of digital technology” in Kenya’s history.

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