How Xcel's land sale became a $65 million flip for private investors

This article is the first in a series of articles CUB intends to publish discussing the ongoing conversations around data centers and their potential impacts on Minnesota’s residential ratepayers.  

Xcel Energy owned 348 acres of land it had used as a buffer to its Sherco coal plant for the last several decades. With the upcoming closure of the generation facility, Xcel sought to sell the buffer land and return the proceeds to its customers. In 2024, Xcel sold the land to an unknown, private corporation called Elk River Technologies, LLC, for $7.9 million. 

Less than seven months later, Elk River Technologies resold the same land to Amazon for $73.5 million— almost ten times the amount Xcel (and therefore Xcel’s customers) received. Local city officials reportedly observed no physical changes to the land before the resale, nor did the company submit any plans to the city in preparation for future development.   

As news outlets reported on the massive resale markup, the public, consumer advocates, and the Minnesota Public Utilities Commission (PUC) all asked the same questions: What happened to make the land value increase by that degree in such a short amount of time, and how can we ensure utility customers are appropriately compensated for future land sales? On February 28, the PUC held a hearing to discuss what went wrong.  

What happened? 

Under Minnesota law, regulated utilities like Xcel must receive PUC approval for land sales exceeding $1 million. Xcel filed its initial petition requesting approval of the sale in September 2022, explaining that Elk River Technologies intended to purchase the land for the purpose of constructing a data center. The parcel is located next to Xcel’s existing Sherco coal plant in Becker, Minnesota, and is well situated for data center development.  

To justify why the sale was in the public interest—the standard required for PUC approval—Xcel primarily relied on a land appraisal it had received for the parcel earlier in 2022. Its market value was estimated to be worth approximately $7.7 million based on an independent third-party evaluation. Because Elk River Technologies offered $7.9 million, Xcel claimed the sale was a good deal, and that any additional competitive bidding process would unnecessarily delay customer refunds. Xcel also pointed to comments and testimony from the City of Becker and Sherburne County officials—the community where the land is located—who enthusiastically supported approving the sale under promises of substantial capital investment and increased tax base arising from the imminent development of a data center.  

But if selling the land for $7.9 million in April 2024 was such a great deal, how did Elk River Technologies turn around and sell it with little to no improvement months later for $73.5 million? It seems to come down to a mix of poorly hedged bets, a lack of transparency, and a harsh introduction to the volatile market of data centers.   

First, the land sale included contract terms that favored the purchaser as demand for data centers grew. Xcel initially entered into a contract to sell the land to Elk River Technologies in July 2022, pending PUC approval. As part of that contract, Xcel offered Elk River Technologies an up-to 18-month option contract for the sale—meaning the price and sale terms were locked in, but Elk River Technologies had 18 months to decide whether or not it actually wanted to purchase the parcel. In that time, Xcel could not sell the land to any other buyer or increase the price. Although the PUC approved the sale in March 2023, Elk River Technologies didn’t act on the option to purchase until a year later, closing the deal in April 2024.  

Xcel asserted that between entering into the sale contract with Elk River Technologies in 2022 and the actual sale of land in 2024, the market for data centers dramatically changed as a result of artificial intelligence (AI). This market shift significantly increased the value of land well-suited for data centers (i.e., industrial land with access to existing utility and water infrastructure). But because Xcel was locked into the option contract, they were unable to renegotiate the terms of the deal by the time Elk River Technologies was willing to make the purchase.   

Xcel also stated that during the 18 months before the sale, Elk River Technologies performed land assessments and other evaluations of the property in preparation for data center development. Presumably, although this work was technically completed before Xcel sold the land, it accounts for some of the value increase as well. Unfortunately, the PUC’s February hearing did not reveal specifics as to what additional work Elk River Technologies did—or who paid for it, so it is difficult to know exactly how that work may have impacted Amazon’s purchase price (if at all). One possible change was the installation of a water main line to the property. But the City of Becker received $20.5 million from the state Legislature for spending on infrastructure improvements that supposedly included plans for its construction within that budget. Notably, local officials indicated no permits were granted after Xcel sold the land nor were any visible physical improvements made. 

Finally, when the PUC approved Xcel’s initial sale it was not aware who Elk River Technologies actually was. Elk River Technologies is, in fact, a subsidiary of Black & Veatch, a Kansas-based engineering and construction firm with expertise in designing and constructing data centers for contracted clients. Black & Veatch has contracted with Xcel Energy before on various energy-related projects.  

How do we make sure this doesn’t happen again?   

The outcome of this land sale is frustrating, to say the least. Had the additional $60 million in profits gone to Xcel instead of Elk River Technologies, customers could have seen a substantially larger refund, and at a time when the utility is requesting a nearly half billion-dollar increase to rates. Although nothing can be done to revise the past sale, the PUC’s February hearing sought to flesh out what lessons could be gleaned to prevent a similar situation in the future. Xcel’s primary defense was that the company acted with the best intentions, using the best information it had when it entered into the contract for sale. While this may be true, there are several recommendations Xcel and others at the PUC identified to mitigate similar risks for future land sale transactions:  

1. Limited option contracts: The length of time Xcel allowed for the option contract with Elk River Technologies left the utility unable to respond to significant market changes as they happened. The regulatory process can take time, and option contracts may be useful negotiation tools for dealing with transactions under uncertain timelines. However, utilities may need to take a more critical approach in future land sale negotiations to limit the amount of time the purchasing party has to make a decision.
2. Competitive bidding: While no one can be expected to anticipate sudden changes in the market, relying on one firms’ appraisal can be a gamble. During the PUC’s initial review of the sale, the Minnesota Department of Commerce agreed to support the transaction but recommended the PUC require competitive bidding for future transactions. Requiring a competitive bidding process can help ensure transparency and fairness of the purchase price, rather than relying on a single estimate from a market appraiser. 
3. Take promised benefits with a grain of salt: The PUC sought to respect the wishes of the host community in making its decision to approve the sale. The information at the time of the PUC’s review pointed to the sale being a reasonable purchase price, and the added benefits promised to Becker made the agreement that much more appealing. As conversations around increased data center deployment in Minnesota continue, this land sale highlights the need for caution. Data centers present an unknown future in a quickly moving, volatile marketplace. Although they often tout promises of job creation, increased tax base, and local economic development, there are currently few regulatory mechanisms in place to ensure those benefits materialize. The 348 acres in Becker may still see a data center developed by Amazon over the next few years. But regulators, lawmakers, local officials, and the general public should carefully scrutinize future projects to ensure Minnesotans are getting the best deal possible.  

CUB will continue to engage in data center discussions at the PUC and the legislature as we look for ways to ensure residential utility customers are protected. Stay tuned for future articles on the data center debate.