Data Center Projects Underway
Former coal sites becoming premium real estate for hyperscaler AI infrastructure.
RWE: Old Coal Sites Power AI's Energy Future
European utility monetizing former power plants as data center real estate with renewable scale.
Updated: Nov 28, 2025
Energy & Materials
Bull & Bear Case
An overview of the main reasons to invest and the key risks involved.
Bull Case
11.4 GW Renewable Capacity Building
Clean energy expansion locks in long-term contracts with tech companies.
Texas Merchant Power Meets AI
Uncontracted capacity converts to premium pricing as hyperscalers compete for power.
Bear Case
Power Prices Could Drop Hard
Renewable oversupply threatens merchant margins as wind and solar capacity grows.
AI Spending May Stall
Data center demand could stall if AI monetization disappoints or efficiency improves.
Wind Weakness Crushes Offshore Margins
Weather volatility directly reduces output while fixed costs and debt continue.
Investment Thesis
Overview of buy and sell case of the business.
Why Invest?
Key pieces of information about the business that you need to know about.
Data Center Projects Underway
RWE has over 10 active data center development projects across Germany, the Netherlands, and the UK, built on former coal plant sites with grid connections already in place. These sites command premium valuations, RWE just sold one UK project for €225 million, delivering a pure book gain with no operating risk. As hyperscalers race to double data center spending to $500 billion annually by 2027, RWE monetizes land that utilities globally are scrambling to find.
11.4 GW Renewable Capacity Building
RWE is adding 11.4 gigawatts of wind, solar, and battery projects to its 38.7 GW operating portfolio, with over 2 GW coming online by year-end 2025. This expansion directly serves the AI-driven electricity demand surge, as tech companies sign long-term power purchase agreements to secure clean energy supply. RWE's Texas footprint alone reaches 4.8 GW, with 450 MW of battery storage under construction to capture ERCOT's volatile pricing and data center contracting opportunities.
Texas Merchant Power Meets AI
RWE controls roughly 10 terawatt-hours of uncontracted merchant capacity in Texas, positioned to lock in multi-year data center agreements as hyperscalers compete for scarce power. Texas data centers already strain the ERCOT grid during peak demand, and RWE's flexible generation plus battery storage allows it to capture premium pricing or convert merchant exposure into contracted revenue. This optionality turns commodity electricity into a strategic asset class as AI infrastructure spending accelerates.
Catalysts
The key events that could drive investment opportunities and shift markets.
Renewable Capacity Commissioning by Mid-2026: RWE plans to commission over 2 gigawatts of wind, solar, and battery projects across Europe and the US before June 2026, including the 1.4 GW Sofia offshore wind farm in the UK. Each project coming online converts development capex into cash-generating assets, tightening power supply just as European data center demand accelerates, which could trigger premium pricing on uncontracted capacity.
Europe's €200 Billion AI Infrastructure Push Through 2027-2028: The EU's AI Continent Action Plan commits €200 billion to triple data center capacity by 2030, with Germany, UK, and France leading demand growth from 9.67 GW today to potentially 20+ GW. RWE's 10+ development projects position it to capture both land sale premiums and long-term power contracts as grid constraints force hyperscalers to partner directly with utilities rather than wait for merchant power.
Secular Power Demand Reversal After 15 Years of European Decline: Europe's electricity consumption dropped every year from 2010-2025, but Goldman Sachs now forecasts 10-15% demand growth over the next decade driven exclusively by AI infrastructure. RWE's 38.7 GW operating fleet plus 11.4 GW under construction positions it to monetize the first sustained demand growth in a generation, potentially reversing two decades of utility sector margin compression.
Key Risks
Key pieces of information about the business risks that you need to know about.
Power Prices Could Drop Hard
European wholesale electricity prices averaged €91/MWh in Germany during H1 2025, but rising renewable capacity could trigger oversupply that crashes margins. RWE earns roughly half its EBITDA from merchant power sales exposed to spot pricing, meaning a sustained drop to €60-70/MWh would cut profits by 20-30%. As wind and solar installations accelerate across Europe, the structural power price floor keeps falling, eroding returns on uncontracted generation.
AI Spending May Slow Faster
Hyperscaler data center capex could decelerate if AI monetization disappoints or efficiency gains from models like DeepSeek reduce infrastructure needs. Goldman Sachs estimates demand could diverge 9-13 GW below baseline forecasts if AI adoption slows, leaving RWE's 10+ development projects and 10 TWh Texas capacity without buyers. Power grid bottlenecks and permitting delays already force some data centers to sit idle, threatening contracted revenue timelines.
Wind Weakness Crushes Offshore Margins
Weak wind conditions in Europe caused RWE's H1 2025 offshore earnings to drop over 25% year-on-year, demonstrating direct exposure to weather volatility. The company generates roughly 30% of power from wind, and prolonged low-wind periods, already visible in 2025, reduce output just as fixed costs and debt service continue. Unlike contracted solar or battery assets, offshore wind carries high capital intensity with unpredictable production, creating earnings swings that equity markets penalize.