The investment bank Jefferies points out in a recent report that the version revised by the Government of the regulation on electricity demand in data centers significantly lowers the initial requirements. In its opinion, this regulatory shift notably reduces the risk for the set of projects of Merlin Properties in Spain.
In the current draft, instead of imposing from the outset a consumption of 80% renewable energy, a transition period is established. During this transitional phase, a 60% renewable coverage is required during peak hours until the end of 2028, a percentage that will increase to 70% in 2029 and will not reach 80% until 2032.
The text also extends the eligibility period for launching new renewable plants from 18 to 36 months and excludes solar energy from the limitation by age. At the same time, it eliminates the additionality requirement, which obliged to back each additional megawatt (MW) of demand in data centers with 1 MW of new renewable capacity.
According to Jefferies, all these adjustments alleviate the execution and energy supply risks in the short term for Merlin Properties, precisely at a time when the company is expanding its data center platform in the Spanish market.
On the other hand, the firm considers the increase of the application threshold of the royal decree from one megawatt to 10 megawatts to be of lesser impact for the socimi, as Merlin is currently developing projects with capacities above that level.
Jefferies reminds, however, that the revised regulation is still a draft and that the Executive plans to give it the green light before the elections on November 29.
In light of this context, the entity has decided to maintain its "buy" recommendation on Merlin Properties, with a target price of 16 euros per share, which implies a potential increase of 39.37% compared to the current stock price of 11.48 euros.