Longspur Research said in a note on Wednesday that Drax Group’s (LON: DRX) failure to win AI Growth Zone status for its planned data centre at the Drax power station site does not pose a significant challenge to the project.
The Times reported that Drax missed out in the current round of the UK government scheme. Analyst Adam Forsyth believes the news has little impact on the immediate opportunity.
“The support scheme while welcome is not an essential prerequisite for UK data centres and we see the Drax site as having specific benefits that outweigh the lack of support under this scheme,” Forsyth wrote.
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Longspur said in its research, which is issuer-sponsored, meaning it is paid for by the company, that the main benefit of the status is a prioritised grid connection.
Drax already holds the import grid connection for the initial 100-megawatt project. The second, 500-megawatt phase is a behind-the-meter development with the potential to take power directly from the Drax power station.
The scheme also offers fast-track planning and financial support. However, Forsyth noted the project has not been scheduled outside the normal planning window, and said it looks financially attractive without extra support. He estimates the initial phase could command a premium power price at current data centre colocation rates.
Longspur values Drax at 1,141 pence a share in its central case, using a discounted cash flow approach with an 8.8% discount rate. Its low case is 937 pence, while a high case including consented pipeline solar and battery projects, plus 100 megawatts of biomass output sold to a data centre, gives 1,395 pence.
