Data Center Projects Face Credit Downgrades Over Local Bans, S&P Warns

S&P Global Ratings reports that data center projects face mounting credit rating downgrade risks due to public opposition and construction moratoriums. Analysts tracked 146 delayed or canceled data center projects across the US, finding that approximately 75% of the disruptions were tied directly to local pushback. Local governments across 40 states have imposed bans or restrictions recently, citing extreme energy costs, water scarcity, and pollution constraints. While the immediate impact on credit grades remains minimal, S&P warns that extended permitting slowdowns could trigger financial penalties, including rent credits and tenant lease terminations that threaten underlying project revenues. "To the extent that moratoriums, permitting slowdowns or potential reversals meaningfully delay projects, financial penalties in the form of rent credits and even tenant termination rights pose credit risk." — S&P Global Ratings