RWE: Electricity is the Lifeblood of AI Infrastructure. Will the Forecast be Raised?
RWE - Electricity is the lifeblood of the AI infrastructure, making access to the grid, a stable supply and the expansion of power generation capacity more important. The demand for electricity will grow significantly in the coming years, which is also due to reindustrialization and electrification. Estimates for the USA assume an increase in annual electricity demand of 2.4% to over 3%. As a supplier of green electricity, RWE will benefit if prices and volumes rise and hyperscalers conclude power purchase agreements at significantly higher prices...
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RWE announced on 05-23-2024 that it had entered into a 15-year power purchase agreement with Microsoft to provide electricity from two onshore wind farms in Texas. In some cases, the companies are prepared to pay significant surcharges to secure the green electricity. Amazon is said to have paid a good 50% premium on the electricity price for its 1 GW deal with Talen Energy. More such contracts with Meta, Apple, Microsoft & Co. are likely to follow, because the companies have committed to climate neutrality and need it for their AI data centers. They secure the green electricity directly from the manufacturers. The assumption of higher electricity prices could lead to rising consensus estimates at RWE in the medium term.
On June 4, 2024, RBC reduced the target for RWE from €55 to €52.50, but that is still a 50% upside and they have put an exciting assumption on the table. According to RBC, RWE could exceed the annual targets and even raise the lower end of the EBITDA range. The current forecast is for EBITDA of €5.2-5.8 billion.
A new upward trend has been forming on the chart since April. The stock market recognizes energy shares as beneficiaries of the AI age because electricity consumption is rising significantly. As a green energy provider, RWE is a major beneficiary and is also starting to break out of the consolidation in the short term. The chart gives the green light.
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