S&P Affirms TeraWulf 'BB-' Rating, Revises Outlook to Stable on Anthropic Data Center Deal

S&P Global Ratings affirmed its 'BB-' issuer credit rating for TeraWulf Inc. (NASDAQ:WULF) but revised the company's outlook to stable from positive. The ratings action follows TeraWulf's announcement of a major 20-year, $19 billion lease agreement with AI company Anthropic to develop a new data center campus.

The Anthropic Data Center Project

The agreement involves the construction of a 401-megawatt AI data center campus in Hawesville, Kentucky. According to the S&P report, this single project is expected to constitute a significant portion of TeraWulf's future business, accounting for approximately 48% of the company's total contracted revenue by 2029.

The facility's development is scheduled in phases, with initial capacity expected to launch in late 2027 and full operational capacity anticipated by early 2028. S&P noted that construction risk is partially mitigated by TeraWulf's partnership with engineering firm Fluor and the site's existing power and transmission infrastructure.

Rationale for Outlook Revision

The revision of TeraWulf's outlook to stable reflects several key uncertainties surrounding the large-scale project. S&P cited concerns over:

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• The financing mix for the new campus
• Inherent construction and execution risks
• The credit profile of Anthropic, which is currently unrated

To address the tenant's credit status, S&P noted that TeraWulf management has indicated the lease will be supported by an investment-grade credit, which could enhance the deal's financial security. Separately, the ratings agency viewed TeraWulf's recent sale of its interest in a Texas joint venture as a modest credit positive.

Subsidiary Rating and Future Triggers

S&P also assigned a 'BB-' issuer credit rating to WULF Compute LLC, the subsidiary managing the project, but with a more favorable positive outlook. The agency attributed this to structural protections, including a lockbox account for lease payments and a strict distribution waterfall that limits the parent company's ability to extract resources from the project entity.

The ratings agency stated it could lower TeraWulf's rating if the transaction is financed aggressively and key metrics deteriorate, such as funds from operations (FFO) to debt falling below 7%. Conversely, an upgrade could be considered if the company sustains debt to EBITDA below 6x and FFO to debt above 9%.