NextDC seeks AU$120m to fund datacentre construction

Following the raising of an oversubscribed AU$100 million last week, Australian-listed NextDC is seeking an additional AU$120 million to fund the construction of a datacentre in Melbourne and another in Brisbane.
Written by Asha Barbaschow, Contributor

Datacentre-as-a-service provider NextDC is seeking to raise AU$120 million to fund the construction of two new datacentre facilities on Australia's east coast.

Melbourne will receive a second datacentre, known as M2, and Brisbane will also receive a second datacentre, B2, but it will be less than half the size of M2.

"Both B1 and M1 have proven to be highly successful facilities for the company in a relatively short period of time," said Craig Scroggie, NextDC CEO. "We are confident that the ongoing demand in these geographies, together with our return expectations warrants this next phase of investment in markets we know well."

According to NextDC, the 10,000 square metre M2 facility will initially contain two megawatts (MW) of capacity, with the intended capacity to be 25MW; the smaller B2 facility will take up 3,000 square metres of space and will open with a 1MW capacity which is expected to house 6MW.

Both facilities should be up and running by the end of 2016, NextDC said.

Over the next 12 to 18 months, NextDC intends to spend between AU$175 and AU$200 million on the new facilities but will not begin work until capital has been raised.

Last week, NextDC issued a senior unsecured notes offering. Initially, the company intended to raise AU$70 million to fund B2, however, the funding round closed four days later with the round oversubscribed by AU$30 million, which increased the total raised in less than a week to AU$100 million.

"We are very pleased with the overwhelming level of support from the debt market, which demonstrates confidence in the company's growth strategy and will allow us to accelerate the development of a new datacentre facility in Brisbane," Scroggie said.

NextDC told potential investors B2 is expected to cost between AU$65 and AU$75 million, which included land acquisition, base building construction, and the initial 1MW of datacentre capacity.

The AU$120 million share offer that was announced on Monday consists of an institutional placement to raise AU$50 million at AU$2.55 per share and a 1 for 6.23 accelerated non-renounceable pro rata entitlement offer to raise AU$70 million at AU$2.25 per share.

This means the offer, fully underwritten by Macquarie Capital, will see approximately 51 million shares offered to the public.

"NextDC expects that the new facilities will generate returns in excess of the company's cost of capital, thereby generating additional value for its shareholders over the longer term," the company said.

NextDC's B1 datacentre in Brisbane is nearing full capacity, with M1, the first of its Melbourne facilities, sitting at 77 percent utilisation, which the company said was based on contracts known as of the end of October.

In September, NextDC inked a AU$1.79 million "critical and sensitive" three-year deal with the Australian government; and signed a five-year contract with the Australian Electoral Commission (AEC), with the AU$1.4 million deal including the relocation of the AEC's critical IT infrastructure.

Also this year, the Brisbane-based company entered into a six-year contract with the Australian government for the provision of datacentre services, in an undisclosed deal valued at approximately AU$35 million; sealed a deal with Microsoft Azure to offer direct cloud connectivity to its cloud platform via ExpressRoute; and signed a collocation agreement with American telco CenturyLink to expand its datacentre footprint to Australia.

NextDC told shareholders on Monday it is currently undergoing advanced discussions in relation to further large customer opportunities across its existing datacentre footprint, which, if successful, would require a further expenditure in the vicinity of AU$45 million.

For the 2016 financial year, NextDC is anticipating revenue of between AU$85 and AU$90 million, with the 40 to 48 percent increase from this year expected to come from federal government and other corporate contracts.

According to NextDC, earnings before interest, taxes, depreciation, and amortisation (EBITDA) will jump by more than 200 percent to between AU$25 and AU$28 million.

For the financial year ending June 2015, NextDC reported AU$60.9 million in revenue, up 85 percent year-on-year, and EBITDA of AU$8 million, a rise of AU$24.1 million on FY14. At the same time, statutory net loss after tax was AU$10.3 million, up from FY14 net loss after tax of AU$22.9 million.

NextDC attributed its rise in revenue to its strong performing datacentre services, which saw revenue of AU$58.7 million, up 93 percent from the same time last year.

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