(Bloomberg) -- Microsoft Corp. and G42, the United Arab Emirates’ top artificial intelligence firm, are joining forces to build a $1 billion geothermal-powered data center in Kenya, the initial phase of a multiyear plan to dramatically increase cloud-computing capacity in East Africa.

G42 will lead the initial investment and handle the facility’s construction in Olkaria, which has abundant geothermal resources — a key benefit in a continent plagued by power outages and a potential boon for Microsoft’s efforts to meet its climate goals. The first phase will have a capacity of 100 megawatts and is expected to be operational in about two years.

Ultimately, the full project will require as much as one gigawatt of electricity from the grid, G42 Chief Executive Officer Peng Xiao said in an interview. The companies didn’t say how long it will take to complete the entire project or how much it will cost.

Microsoft will use the initial cloud-computing power to create an East African region for its Azure products, boosting the company’s ability to sell its services there. Right now the nearest Microsoft data center for Kenyan customers is thousands of miles away in South Africa. As part of the deal, the Kenyan government has agreed to move more of its services to the cloud, which Microsoft hopes will fuel overall demand. Ultimately the data center complex will handle artificial intelligence services and could provide cloud computing to nearby countries like Uganda, Rwanda and Tanzania. 

Microsoft and G42 announced the initiative as US President Joe Biden prepared to welcome Kenyan President William Ruto to Washington for a state visit aimed at deepening US ties with Africa. The continent is emerging as a new arena of global competition for the US as it seeks to counter Chinese and Russian inroads there. Chinese companies like Huawei Technologies Co. have invested heavily in Africa, building data centers, internet services, surveillance systems and smart power grids.

On Friday, Microsoft, G42 and Kenyan officials are scheduled to sign a letter of intent that was drafted with the help of the US and UAE governments.

“This is the single biggest step to advance the availability of digital technology in, I think, the country’s history,” said Microsoft President Brad Smith, who has been visiting Kenya, where the company has 500 software developers, for almost 15 years. “This shows what G42 and Microsoft have the opportunity to do together that neither one of us could do separately. I frankly think it shows that what the United States and the United Arab Emirates can do together that helps bring technology to new countries, especially across Africa.”

In April, Microsoft agreed to invest $1.5 billion in G42, a deal brokered by the Biden administration in an effort to curtail Chinese access to AI technology. As part of the agreement, G42 agreed to halt its business relationships with Chinese companies including Huawei and use US technology instead. Smith is joining G42’s board, and G42 will use Azure for its AI applications.

G42 has businesses spanning everything from cloud computing to driverless cars. It’s part of the $1.5 trillion empire of Sheikh Tahnoon bin Zayed Al Nahyan, one of Abu Dhabi’s two deputy rulers, national security adviser of the United Arab Emirates and brother to its president.

The company’s push into Kenya is part of the UAE’s effort to gain geopolitical clout in Africa. In the past two years, the oil-rich nation has pledged to invest about $100 billion in the continent. The UAE is also competing with Saudi Arabia to become the regional AI superpower, and G42 is central to these plans.

In Kenya, G42 will work on large language models for Swahili and English and add other African languages in the future, Xiao said. The company will also create AI models for agriculture and other areas. Microsoft’s cybersecurity division will offer regional customers protection from hackers and help bring wireless broadband to 20 million people, or about 40% of Kenya’s population by the end of next year, Smith said.

“This will take several years to give us a positive financial return,” Xiao said. “But we’re not there for the near-term return. We believe this is a continent where we have to have a strong foothold.”

--With assistance from Loni Prinsloo and Olivia Solon.

©2024 Bloomberg L.P.