Kinder Morgan Permian Link Pipeline: What It Means for Fermi (FRMI)

Kinder Morgan announced on 21 October 2026, in its third-quarter results, an approximately $4.2 billion Permian Link natural gas pipeline to serve new power generation for an A-rated hyperscaler in the Texas Panhandle. [1] The Permian Link pipeline could matter for Fermi (FRMI), whose gas-short data center campus sits in the same region.

What Kinder Morgan announced

The project is designed to provide about 2.8 Bcf/d of natural gas transportation capacity. Kinder Morgan's share of the cost is about $1.6 billion, and the line is expected in service in the third quarter of 2030. [1] Bloomberg reported that the pipeline will cross West Texas and the Panhandle to supply fuel for a data center complex. [2]

On the earnings call, CFO Kim Dang said "Permian Link is contracted with an A-rated hyperscaler." [3] Management added: "We've got an anchor hyperscaler, but we had significant interest," and said the line can be upsized by adding compression. [3]

The project had not been named before. On its July call, Kinder Morgan only described a $10 billion-plus pipeline of unsanctioned opportunities. [4]

Background: why gas pipelines decide data center sites

AI data centers use a lot of power, and many new campuses build gas-fired plants on site rather than wait for grid upgrades. Those plants need steady gas, so access to a pipeline becomes a key siting condition.

The Permian Basin in West Texas is a major US oil and gas region. The Texas Panhandle is the state's northern tip; its main city is Amarillo. The new pipeline moves gas from the first to the second.

At an assumed plant efficiency of about 7,000 Btu per kWh, 2.8 Bcf/d of gas could fuel roughly 15 GW of generation running continuously. That is an estimate based on an assumed heat rate.

Pipeline contracts are usually take-or-pay: the customer pays for its contracted volume whether it uses it or not. Signing one signals a firm plan for future gas use.

From a new Texas pipeline to local data center campuses

First, the hyperscaler, through the power providers serving its data centers, has locked in long-term gas transportation. [1]

Second, Kinder Morgan benefits directly. At about 5.7x the investment-to-EBITDA multiple on its backlog, $1.6 billion of equity investment implies roughly $0.28 billion a year of equity-share EBITDA from 2030.

Third, once the line is running, gas-fired generation in the Panhandle is no longer mainly limited by fuel.

Fourth, the effect reaches campus developers in the same region. Fermi plans up to 11 GW near Amarillo, which would need about 1.85 Bcf/d of gas, but its firm supply covers only about 1.8 GW. Gas and large tenants are both its bottlenecks.

There are two possibilities. The hyperscaler may be near Fermi's campus, or the line's spare or upsized capacity could supply Fermi's later phases, lowering Fermi's fuel and tenant risk. Or the hyperscaler has chosen a different Panhandle site, and one of the large customers Fermi is courting is gone. Neither the hyperscaler nor its site has been disclosed; the link is only an inference from geography.

Companies that could be affected

Fermi (FRMI) develops large data center campuses with on-site power in Texas. It sits on the demand side of this chain, as a buyer of gas and a seller of power.

The company has a 5,236-acre site in Carson County under a 99-year ground lease and plans up to about 11 GW of generation, with potential to expand to about 17 GW. [5] It has firm natural gas supply arrangements with Energy Transfer to support Phase 1, at up to about 300,000 MMBtu per day over time. [5] At the same efficiency, that gas would run about 1.8 GW flat out, about 16% of the plan.

Fermi has no revenue yet. FY2025 revenue was $0, with a net loss of $486.4 million and year-end cash of $408.5 million. [6] On its 13 August call, the company said it is in substantive discussions with roughly a dozen prospective customers, including neocloud providers and major hyperscalers. Its binding TensorFlow agreement covers 222 MW for an initial 15 years and about $6.5 billion of total revenue over the initial term. [7]

If Permian Link or its upsized capacity can supply Fermi's later phases, Fermi could benefit as the risks to starting and leasing those phases fall. If the hyperscaler picked another site, Fermi could come under pressure: its list of large prospects would shrink and revenue would still rest mainly on the 222 MW contract. The pipeline's delivery points will decide which case applies.

Fermi closed at $2.86 on 21 October, down 2.72%, for a market cap of about $1.83 billion. It is down 44.6% over one month and 85.7% over one year. [8]

What to watch

Gas does not reach the Panhandle until the third quarter of 2030, so near-term changes can only come from disclosures.

First, Fermi's third-quarter call in mid-November: any hyperscaler lease, new gas supply beyond Energy Transfer, or comment on this pipeline.

Second, Kinder Morgan's fourth-quarter call in January 2027: whether interest beyond the anchor turns into an expansion.

Third, the pipeline's application to the Federal Energy Regulatory Commission, expected in 2027, will list delivery points. Points in Carson or Potter County, or an interconnect tied to Fermi, would link the two.

Fourth, Texas air permits: multi-GW gas generation filings in Panhandle counties other than Carson would point to a rival site. Fermi's own 5 GW permit decision is targeted for Q4 2026.

The chain would break if:

• the hyperscaler's site is far from Amarillo with no Fermi role, and Fermi's later gas comes from Energy Transfer or ONEOK expansions;
• Fermi signs a large tenant and full gas supply before the pipeline files its application;
• the pipeline fails to win federal approval or slips well past Q3 2030;
• Fermi's financing fails or it misses the July 2027 milestone for its first 210 MW, in which case its own execution would outweigh this chain.

This only helps you find transmission chains you may have missed. It is not a stock recommendation.

Sources

[1] Kinder Morgan · 2026-10-21 · Q3 2026 earnings release (8-K Ex. 99.1) · https://www.sec.gov/Archives/edgar/data/0001506307/000150630726000130/kmi2026q38-kex991.htm [2] Bloomberg · 2026-10-21 · New $4.2 billion Texas gas pipe to supply fuel for data center · https://www.bloomberg.com/news/articles/2026-10-21/new-4-2-billion-texas-gas-pipe-to-supply-fuel-for-data-center [3] Investing.com · 2026-10-21 · Kinder Morgan Q3 2026 earnings call transcript · https://www.investing.com/news/transcripts/earnings-call-transcript-kinder-morgan-tops-q3-2026-estimates-shares-rise-93CH-4964264 [4] Drillr earnings call summary · 2026-07-22 · Kinder Morgan Q2 2026 call [5] Fermi · 2026-03 · Form 10-K for FY2025 · https://www.sec.gov/Archives/edgar/data/2071778/000207177826000010/frmi-20251231.htm [6] Drillr financial data · 2025-12-31 · FRMI FY2025 revenue, net loss and cash [7] Drillr earnings call summary · 2026-08-13 · Fermi Q2 2026 call [8] Drillr market data · 2026-10-21 · FRMI close, market cap and returns