NextDC seeks AU$672m to fund its data centre growth agenda

AU$350 million of the new funds will be used for the first phase of a third Sydney data centre.
Written by Asha Barbaschow, Contributor
Image: NextDC

NextDC has announced its intentions to raise AU$672 million, at a cost of AU$7.80 per share, as the company looks to maintain its "growth agenda momentum".

The cash injection will be used to fund a new Sydney data centre (S3) and allow the company to pursue what it called "growth initiatives", which includes additional data hall capacity at existing data centres, as well as new data centre site acquisitions.

AU$350 million of the new funds will be used for the first phase of S3, it said.

S3 will be built in Sydney's Gore Hill, 10km from the Sydney CBD and 7km and 8km from S1 and S2, respectively. S3's initial IT load is expected to be 12MW, with total capacity of 80MW expected to be available by the first half of 2022.

"Based on the strong level of orders already received for S2 and our growing confidence in the forward sales pipeline, NextDC is confident that the projected demand in Sydney, together with our return expectations, warrants the next phase of investment in Sydney's third generation of data centres," CEO Craig Scroggie told shareholders Thursday.

Since 30 June 2019, NextDC's overall contracted utilisation has increased by more than 6MW to 59MW, with New South Wales contracted utilisation increasing to more than 32MW, representing around 70% of its total planned capacity.

Victorian contracted utilisation sits at around 38% of its total planned capacity across its three Melbourne -- M1, M2, and M3 -- data centres.

The company also has two facilities in Perth, P1 and P2, and B1 and B2 in Brisbane. NextDC's C1 data centre in Canberra connects directly to the government's fibre network, the Intra-government Communications Network (ICON).

Back in April 2018, NextDC set off to raise AU$281 million to fund S3, M3, and P2.

Touching on the COVID-19 outbreak, NextDC told shareholders current events had "resulted in significant market falls and volatility".

"There is continued uncertainty as to the government response and the likelihood of an Australian economic recession of uncertain duration and severity. If operations are interrupted or suspended for a prolonged period as a result of any such events, there may be a material adverse impact on the operating and financial performance and prospects of NextDC," it said.

"NextDC continues to see significant demand for its data centre services during a turbulent market environment due to COVID-19. We have decided to prudently equity fund near-term growth opportunities in this period of market volatility to continue to support customer demand and ensure there is no loss in the momentum of the company's development," Scroggie added.

That aside, the company reaffirmed FY20 guidance, expecting earnings before interest, tax, depreciation, and amortisation (EBITDA) to come in at around AU$100 million to AU$105 million, and revenue in the range of AU$200 million to AU$206 million.

For the first half of the financial year, NextDC reported a AU$11.3 million jump in revenue to AU$95.4 million, with EBITDA increasing by AU$13.3 million, or AU$8.7 million in underlying terms, to AU$51 million.

The data centre company walked away with an increased net loss of nearly AU$5 million compared to AU$3 million posted for the first half of 2019.

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