NEXTDC Limited (ASX: NXT) today announced the signing of a new customer contract of approximately 1.5MW as well as the plans for a second Sydney data centre (“S2”) to be funded via a capital raising of approximately $150 million.
- An additional contract for the provision of data centre services at S1 to a major international customer (“the Customer”) for additional capacity approximately 1.5MW.
- Second data centre planned for Sydney (“S2”), with target capacity of approximately 30MW – practical completion is expected in 1H FY18.
- Fully underwritten capital raising of approximately $150 million comprising a Placement Offer to institutional investors and an Entitlement Offer.
Second NEXTDC data centre for Sydney
NEXTDC’s new contract for the provision of data centre services is with the same Customer with which the company announced an initial contract on 11 December 2014 and exhausts the Customer’s rights of first refusal relating to the S1 facility.
As a result of entering into the new contract for approximately 1.5MW of capacity at S1 to the Customer, the data centre’s pro forma contracted utilisation has increased to 82% (from 71% at 30 June 2016).
Accordingly, NEXTDC today announced its decision to develop a second data centre in Sydney. The company is currently undertaking due diligence on several potential sites for the new facility, with an expected target capacity of approximately 30MW capacity and expects practical completion of S2 in 1H FY18.
Consistent with its strategy in relation to the company’s new facilities in Brisbane (“B2”) and Melbourne (“M2”), NEXTDC intends to hold the underlying property at S2 once the facility is developed. This strategy increases NEXTDC’s control over the assets and is consistent with the increasing scale and strengthening operating leverage of the company’s operations.
Commenting on S2, Chief Executive Officer, Mr Scroggie said: “S1 has proven to be highly successful for the company in a relatively short timeframe. We are confident that the demand in Sydney, together with our return expectations, warrants the next phase of investment.”
“NEXTDC continues to evolve and refine the design of our facilities; S1 is already one of Australia’s most awarded data centres, and with a planned 30MW at full fit out, S2 will have roughly double the capacity of S1, and be designed for its critical infrastructure to scale with customer uptake and adapt to their specific needs.”
In order to fund S2, NEXTDC today also announced the launch of a fully underwritten Capital Raising consisting of a Placement and Entitlement Offer.
The company intends to use the proceeds from the $150 million Capital Raising to fund the acquisition of land and the associated development of S2 as well as other general corporate purposes. In total, NEXTDC intends to invest between $140 million to $150 million in the development of S2 across FY17 and FY18, of which $60 million to $100 million is expected to be spent in FY17.
NEXTDC expects that the S2 facility will generate returns in excess of the company’s cost of capital, thereby generating additional value for shareholders over the longer term.