IFT - Infratil

[mike2020]

IFT have a new state of the art imaging set up in Whanarei. People used to either travel to Auckland or actually not bother going which was a sad state of affairs.

[Toddy]

Stock rerating underway.

Shareholder roadshows are in full swing.

[mike2020]

I attended one. They answered all questions well enough for me. Fisher funds provide better refreshments. I see that as a positive for IFT. All business and very available on a one to one basis. A lot of growth projected and I expect 12 months from now they will be presenting a different picture.

[Ggcc]

I do believe we have another ATH!!!

It's running up very fast on no news. We may get a please explain why

[Toddy]

https://m.youtube.com/watch?v=x8ByFTrIAyM#bottom-sheet

Hopefully the link works.
Sharesies interview with Jason Boyes

[tim23]

I do believe we have another ATH!!!

It's running up very fast on no news. We may get a please explain why

Market digesting recent result that’s all.

[LaserEyeKiwi]

I do believe we have another ATH!!!

It's running up very fast on no news. We may get a please explain why

Listened to the sharsies interview, which may be what drove up the share price today by the sharesies crowd.

Was jsut a few percent away from breaking $10 Billion market cap today, before that heavy profit taking near the close.

[Bjauck]

Market digesting recent result that’s all.The SP was $11.25 on 20 May. I was surprised then that it shortly went back under $11. Maybe this break out will be sustained. I think the results were good enough for that.

I would like Infratil to favour the renewables and data centre strategy as opposed to more investment in airports. In my opinion, With airports there are greater macro risks including carbon policy affecting long haul holiday flights, the risk from more epidemics etc.

[LaserEyeKiwi]

The SP was $11.25 on 20 May. I was surprised then that it shortly went back under $11. Maybe this break out will be sustained. I think the results were good enough for that.

I would like Infratil to favour the renewables and data centre strategy as opposed to more investment in airports. In my opinion, With airports there are greater macro risks including carbon policy affecting long haul holiday flights, the risk from more epidemics etc.

I don’t think they are planning on any more airport investments, outside of probably buying the wellington Council share of Wellington airport (obviously owning 100% of Welly airport is far better when considering ways to realize gains/exit that investment).

[Bjauck]

I don’t think they are planning on any more airport investments, outside of probably buying the wellington Council share of Wellington airport (obviously owning 100% of Welly airport is far better when considering ways to realize gains/exit that investment). I would be happy if Infratil and the Council put WIA up as an IPO, asap.

AIA’s SP is at a reasonable level now.

[LaserEyeKiwi]

I would be happy if Infratil and the Council put WIA up as an IPO, asap.

AIA’s SP is at a reasonable level now.

Personally I would prefer them to wait until interest/cap rates have improved to get a better valuation in any sale or IPO. Plus the airport is in a heavy capex phase in the year ahead so at present wont be that enticing to a buyer from a cashflow generation perspective.

[winner69]

See Newfield from Morrison on that jaunt to Japan with the PM

[pierre]

See Newfield from Morrison on that jaunt to Japan with the PM
If they ever get there! That clapped out Air Force 757 has let the side down again. Stranded in PNG, so an Air NZ flight to Japan is being diverted to pick up the NZ delegation. Another major embarassment for NZ!
Time to stump up for a decent plane or just fly commercial for these events.

[kiora]

See Newfield from Morrison on that jaunt to Japan with the PM

Thanks W 69
https://morrisonglobal.com/news/paul-newfield-joins-nz-prime-ministers-mission-to-southeast-asia/

Interesting Interview

https://www.stuff.co.nz/business/300812373/ceo-paul-newfields-journey-from-backpacker-philosophy-to-global-infrastructure

[Toddy]

Cap raise. Uggh.

[Balance]

Cap raise. Uggh.

Right thing to do when institutional support is very strong. Which is what happens when a company consistently delivers.

[Bjauck]

Cap raise. Uggh. A Billion dollar placement at $10.15. Quite a discount. Kiwi companies seem to like to undermine their shareholders.

[Toddy]

Yes, it's all positive with very large returns coming from data centres . It's just bad timing for me having to find the capital.

[LaserEyeKiwi]

Crikey!

Really going deep on CDC.

reducing gearing to 11%.

[stoploss]

A Billion dollar placement at $10.15. Quite a discount. Kiwi companies seem to like to undermine their shareholders.
from the shareholder letter ....
"The Retail Offer will give Eligible Shareholders in New Zealand and Australia the opportunity to apply for up to a maximum ofNZ$150,000 and A$45,000, respectively, worth of new shares in Infratil on and in accordance with the Terms and Conditions in
the Retail Offer Document, without incurring brokerage or other transaction costs. Participation in the Retail Offer is optional and
is structured to enable a vast majority of Infratil's Eligible Shareholders to apply for their equivalent pro-rata amount, or greater,
if they wish to participate."

[kiora]

Hmmm
Need to tap the OD facility.It was getting a bit stales as I haven't needed it for a while :)

[huxley]

Pretty annoying that they don’t just make these public broadcasts..

https://business.scoop.co.nz/2024/06/17/infratil-conference-call-date-is-17june-2024/

[Bjauck]

from the shareholder letter ....
"The Retail Offer will give Eligible Shareholders in New Zealand and Australia the opportunity to apply for up to a maximum ofNZ$150,000 and A$45,000, respectively, worth of new shares in Infratil on and in accordance with the Terms and Conditions in
the Retail Offer Document, without incurring brokerage or other transaction costs. Participation in the Retail Offer is optional and
is structured to enable a vast majority of Infratil's Eligible Shareholders to apply for their equivalent pro-rata amount, or greater,
if they wish to participate."
The retail offer is for $150,000,000; The placement is for $1,000,000,000. So non-shareholders have the ability to take part in the much larger placement. Why not have a renounceable rights issue. Maybe a bit of extra cost, but more transparently fair for existing shareholders, especially for individual retail holders, who may not have the time, resources or stockbroker relationship to jump in on the placement - or rights.

I think the expansion of CDC is good investment, what with cloud data storage and AI growth.

[GTM 3442]

If they ever get there! That clapped out Air Force 757 has let the side down again. Stranded in PNG, so an Air NZ flight to Japan is being diverted to pick up the NZ delegation. Another major embarassment for NZ!
Time to stump up for a decent plane or just fly commercial for these events.

Based on what he said last year, I thought that Mister Luxon wasn't going to use the RNZAF, but was going to fly commercial anyway.


https://www.nzherald.co.nz/nz/politics/national-leader-christopher-luxon-wont-use-ancient-defence-force-planes-will-fly-commercial-instead/2B7TGS643FEDJEL33GIETQZUXM/

PS A couple of US freight/courier companies still run fleets of Boeing 757s - maybe the RNZAF ones could get flogged off for spare parts?

[Toddy]

The retail offer is for $150,000,000; The placement is for $1,000,000,000. So non-shareholders have the ability to take part in the much larger placement. Why not have a renounceable rights issue. Maybe a bit of extra cost, but more transparently fair for existing shareholders, especially for individual retail holders, who may not have the time, resources or stockbroker relationship to jump in on the placement - or rights.

I think the expansion of CDC is good investment, what with cloud data storage and AI growth.

Agree. I'm a hughe fan of IFT. But I'm left scrambling on this one due to the timing.

There must be something else happening in the background regarding the timing. IFT always have a plan and a number of surprises.

[huxley]

Maybe in talks with Wellington City Council

[Toddy]

I'm not expecting a drag on the SP like the Voda deal. This transaction puts IFT into the 10 billion dollar club which opens a number of other doors.

[Nor]

Will Jarden have these placement shares available? Had a look a little while ago and nothing.

[Goose]

Will Jarden have these placement shares available? Had a look a little while ago and nothing.

Hey Nor...no, I contacted them earlier and they have confirmed that they are not on the ticket for today's placement.

[Nor]

Thanks Goose.

[Count von Count]

Maybe in talks with Wellington City Council

That was my thought. Going through the release, I recall reading that only half of it was for the CDC.

That said, it seems more likely to be for other renewable energy projects... possibly to support the CDC, or possibly to expand the solar farms in the US.

[ratkin]

What sort of scaling are we expecting on these? Normally end up with a fraction of what I ask for.

[Toddy]

https://www.nzherald.co.nz/business/the-market-implications-of-infratils-115b-capital-raise/EXR45LM7EFFEHPX2NQXTTS4BUQ/


Paywalled. Exciting times ahead. And will push IFT into global indices. So very different to the Voda raise.

[kiora]

"CDC is positioned for growth"

https://infratil.com/news/infratil-announces-nz1150-million-equity-raising/infratil-investor-presentation-nz1150-million-equity-raise/

[Southern Lad]

What sort of scaling are we expecting on these? Normally end up with a fraction of what I ask for.

Presentation advises that total new shares expected to be 13.5% of current issued capital, and that they will try their best to issue shares to retail holders for their pro rata share of the new shares issued. Assuming share price holds up when trading halt lifted, then suggest applying at this level (135 additional shares per 1,000 currently held). Little point in applying for more unless share price tanks over the next couple of weeks.

[Count von Count]

That was my thought. Going through the release, I recall reading that only half of it was for the CDC.

That said, it seems more likely to be for other renewable energy projects... possibly to support the CDC, or possibly to expand the solar farms in the US.

From the Investor Statement:

Proceeds to fund accelerated growth of CDC, and provide additional balance sheet flexibility to allow Infratil to continue to invest across its portfolio

[Jenny Ruth]

Hi. If you're interested in my take of Infratil's plans for CDC, you can find it here: https://justthebusinessjennyruth.substack.com/

[Toddy]

Little NZX has pumped out 750k shares already on its own this morning.

Let's see what happens when the big boys join the action when the ASX opens.

[huxley]

Shares trading well above the placement price :)

[Bjauck]

Little NZX has pumped out 750k shares already on its own this morning.

Let's see what happens when the big boys join the action when the ASX opens. With the current share price that indicates good buyer demand. Also, those flippers who bought into the placement have got a good quick profit too.

[Toddy]

I really respect the market for driving the price to back to under 11 dollars last week to get this deal away at NZ$10.15 per share.

[Snow Leopard]

I really respect the market for driving the price to back to under 11 dollars last week to get this deal away at NZ$10.15 per share.

SP been up and down like a gooseberry in a lift recently.

Sold some other stock last week so that I had cash at hand for any opportunity that presented itself and then IFT go and take it. :ohmy:

[Toddy]

SP been up and down like a gooseberry in a lift recently.

Sold some other stock last week so that I had cash at hand for any opportunity that presented itself and then IFT go and take it. :ohmy:

Well, it's an easier conversation with the wife when she notices 48k missing from the kids Uni bank account funds on the 8th.

[Goose]

Was anyone able to get in on the Placement action? It looked to me that this was confined to institutional investors (perhaps unless you are a client of UBS) - I'd be interested to know if that wasn't the case. I shall be participating in the Retail Offer.

[mike2020]

Is there an entitlement date? Holding at date of announcement? I haven't read it through. No surprise after the exponential growth they indicated at the roadshow. I really don't see dilution as in issue given all new capital will aid growth. Probably being a little simplistic.
I was just thinking anyone not holding might want to get in for the cheaper shares you can apply for.

[maclir]

Is there an entitlement date? Holding at date of announcement? I haven't read it through. No surprise after the exponential growth they indicated at the roadshow. I really don't see dilution as in issue given all new capital will aid growth. Probably being a little simplistic.
I was just thinking anyone not holding might want to get in for the cheaper shares you can apply for.

9pm last Friday.

[LaserEyeKiwi]

Is there an entitlement date? Holding at date of announcement? I haven't read it through. No surprise after the exponential growth they indicated at the roadshow. I really don't see dilution as in issue given all new capital will aid growth. Probably being a little simplistic.
I was just thinking anyone not holding might want to get in for the cheaper shares you can apply for.

It is a little bit dilutive considering the capital coming in was priced at a fairly large discount to the share price, and from an EPS perspective there is also dilution as there is no change to guided annual earnings and that is now spread across a significantly larger amount of shares.

However if one feels the share price is significantly undervalued already, and that growth will be fairly strong, then its not that big of a deal.

[kiora]

It looks like some institutions where not able to get in on the placement & the others must have been scaled back & now bidding for more?

[mshierlaw]

Is there an entitlement date? Holding at date of announcement? I haven't read it through. No surprise after the exponential growth they indicated at the roadshow. I really don't see dilution as in issue given all new capital will aid growth. Probably being a little simplistic.
I was just thinking anyone not holding might want to get in for the cheaper shares you can apply for.

If you are current holder you should have an email from link market services. Condition in the email is that you can't forward the document so please don't ask. The offer document will be available on the IFT website on Thursday 20th June.

I have just bought some IFT 350 bonds so not sure I want any more exposure here, I did grab my entitlement in the last two raises.

[kiora]

Will there be scaling in " NZ$150 million non-underwritten retail offer"?
That implies around 14,778,325 shares for retail offer if it is to raise the $150,000,000?

BUT 837,274,000 shares on issue before capital raise?
If the "entitlement" is as Southern Lad says is 13% to keep pro rata shareholding?
That would be 108,845,620 shares raising $1,099,334,000 if shareholders were to keep it pro rata?

But this could be a problem?
" NZ$150 million non-underwritten retail offer, with the ability to accept oversubscriptions at Infratil’s complete discretion ("Retail Offer")"


So it will need heavy scaling OR accept oversubscriptions of xxxxxx

Question:Was there a need for the placement to be underwritten?

[Toddy]

As per last capital raise. Shareholders will be allocated their entitlement with intentions to keep the same percentage holding.

However, there is a max amount of $48,000 Nzd per shareholder.

[Entrep]

Incredible showing... compared to say HGH cap raise for example.

[Toddy]

Incredible showing... compared to say HGH cap raise for example.

Also driven by the 10 billion dollar club index.

[maclir]

As per last capital raise. Shareholders will be allocated their entitlement with intentions to keep the same percentage holding.

However, there is a max amount of $48,000 Nzd per shareholder.

Where do you get 48k from?

[Toddy]

Where do you get 48k from?

45K AUD. Was on the Infratil email sent just after the offer was released to the market.

[warthog]

If you are current holder you should have an email from link market services. Condition in the email is that you can't forward the document so please don't ask. The offer document will be available on the IFT website on Thursday 20th June.

The important points from the email to IFT holders:

Further details regarding the Retail Offer, including how to apply, are set out in the Retail Offer Document, which will be made available on Thursday, 20 June 2024 at www.infratilshareoffer.com

The Retail Offer is subject to the terms and conditions included in the Retail Offer Document. Eligible Shareholders are encouraged to read the document carefully, and if in any doubt about whether or not to apply for shares under the Retail Offer, to consult with a financial or other professional advisor.

Eligible shareholders wishing to participate will be able to apply online at www.infratilshareoffer.com from Thursday, 20 June 2024 until 5:00pm (NZST) / 3:00pm (AEST) on Monday, 8 July 2024.

[Ggcc]

It looks like some institutions where not able to get in on the placement & the others must have been scaled back & now bidding for more?
Who knows maybe Blackpeter got on board. I hope so for him.

[maclir]

45K AUD. Was on the Infratil email sent just after the offer was released to the market.

150k for Kiwis

[Valuegrowth]

As per last capital raise. Shareholders will be allocated their entitlement with intentions to keep the same percentage holding.

However, there is a max amount of $48,000 Nzd per shareholder. Will it affect existing shareholders? I mean by way of share dilution. Thanks.

[Toddy]

150k for Kiwis

I stand corrected. 150k.

[Toddy]

Will it affect existing shareholders? I mean by way of share dilution. Thanks.

Only if you were going to be up for more than 150k. Otherwise they will give you your full entitlement.

[warthog]

New shares are issued so yes it will dilute. If you hold IFT and generally approve of the capital raise, you might consider taking up your full allocation of new shares to maintain your ownership as a percentage of all shares outstanding.

[mike2020]

I still think dilution is probably going to be a fallacy here. The overall growth they should achieve from this wont see your existing shares devalue. Opposite I expect. EPS maybe a short term dip.
Also they seemed excited by Wellington council exiting the airport. They could be buyers or part of a bigger sale. It opened up options. Plus they really seem to like the asset either way.

[huxley]

I would be surprised if they don’t buy the airport, they pay dividends, interest and Morrison fees in NZD, just makes sense to buy an asset they already know very well

[Toddy]

I would be surprised if they don’t buy the airport, they pay dividends, interest and Morrison fees in NZD, just makes sense to buy an asset they already know very well

Agree.

Now my 12 year old is armed with the information (and a spreadsheet) to explain to his mother why his education fund should be invested into discounted IFT shares. He is all over it.
The second lesson will be all about when to pick the correct timing to have the discussion.

[maclir]

As a Wellingtonian I like the idea of IFT owning the airport, as it roots them in the city a little more than would otherwise be the case, but it is a very small part of the portfolio. They were unsurprisingly asked at the recent roadshow if they would be looking to buy the council's share, and whilst you can't read much into the response's lack of enthusiasm, they hold all the aces vs the Council and the price would need to be very attractive. What price a runway extension...

[Toddy]

I thought they had gone cold on a runway extension and were going down the route of better planes and technology to eventually meet the requirements for a population the size of Wellington.

IFT have been very poker faced on this one. Let's just say that Bright and A2 do not have a monopoly on playing a good chess game.

[winner69]

As a Wellingtonian I like the idea of IFT owning the airport, as it roots them in the city a little more than would otherwise be the case, but it is a very small part of the portfolio. They were unsurprisingly asked at the recent roadshow if they would be looking to buy the council's share, and whilst you can't read much into the response's lack of enthusiasm, they hold all the aces vs the Council and the price would need to be very attractive. What price a runway extension...

Needs a new bigger seawall first before it floats away

[Ggcc]

As a Wellingtonian I like the idea of IFT owning the airport, as it roots them in the city a little more than would otherwise be the case, but it is a very small part of the portfolio. They were unsurprisingly asked at the recent roadshow if they would be looking to buy the council's share, and whilst you can't read much into the response's lack of enthusiasm, they hold all the aces vs the Council and the price would need to be very attractive. What price a runway extension...

Spoke to one of the guys at road show and they mentioned that the extension would most likely never happen. Really interested how open minded they were to any questions given.

[Valuegrowth]

New shares are issued so yes it will dilute. If you hold IFT and generally approve of the capital raise, you might consider taking up your full allocation of new shares to maintain your ownership as a percentage of all shares outstanding.Thank you warthog.

[maclir]

I thought they had gone cold on a runway extension and were going down the route of better planes and technology to eventually meet the requirements for a population the size of Wellington.

IFT have been very poker faced on this one. Let's just say that Bright and A2 do not have a monopoly on playing a good chess game.

Yes, you're right. I guess the point I was trying to make is that you want to have a good relationship with the local authority, and that's the only baragaining chip the council has in getting the best price it can from IFT, who have no need to own 100% of the airport.

[maclir]

Needs a new bigger seawall first before it floats away

Current state of play, following consultation https://www.wellingtonairport.co.nz/news/airport-projects/renewing-our-sea-defences/

[Bjauck]

Agree.

Now my 12 year old is armed with the information (and a spreadsheet) to explain to his mother why his education fund should be invested into discounted IFT shares. He is all over it.
The second lesson will be all about when to pick the correct timing to have the discussion. Great lessons. We need more Toddy Juniors!

[Bjauck]

Needs a new bigger seawall first before it floats away Former poster BlackPeter used to bang on about AIA being a dubious long term investment with rising sea levels inundating the runway and land!

[Santiago]

Just catching up with things. Keen to understand whether via the retail offer they will just grant a pro rata amount to enable holders to maintain percentage, or is there a chance they’d allow up to $150k regardless of current holding? Interested in views of seasoned experts here!

[LaserEyeKiwi]

Spoke to one of the guys at road show and they mentioned that the extension would most likely never happen. Really interested how open minded they were to any questions given.

Main issue is the pilots association along with regulators were highly likely to follow through with the result that the runway extension would not have been able to take any larger/longer distance planes. The main reasoning being that the current runway has a special exemption for being so short due to geographic constraints, and as such does not have the standard safety distances. So if the runway got extended, all the extra runway length would see the special exemption removed and the extra tarmac would simply be the standard safety buffer.

So any investment in a longer runway would result in a safety increase, but no extra larger/longer range capability or revenue generation - which makes it a dead on arrival proposal as a commercial proposition. The only way it would happen under that scenario is if the airport was notified that it would lose its special exemption at a specified point in future, and so would be forced to extend the runway simply to maintain its current capabilities.

Figners crossed the Boom Overture (new supersonic airliner) can land on a short runway, it’s long, but very light. Wouldn’t give too much in way of extra further distance locations to fly too (could do WLG to Hawaii, but not sure wellington market would support that), but can do any South Pacific/Australian east coast destination in a significantly shorter flight time (for those willing to pay extra). As a Wellingtonian, I would be annoyed if that ended up being restricted to Auckland & Christchurch.

https://boomsupersonic.com/overture

[Bjauck]

Back to the future. Concorde was a beauty. Americans initially tried to stop it landing in New York, ostensibly because it was so noisy when taking off and landing and ascending. However a major reason was probably probably because British Airways (and not an American airline) was operating it. NZ is not so concerned about airline noise impinging on residents. There are plenty of nighttime flights over Auckland already. Population growth means flight paths are now over residential areas.

[maclir]

Back to the future. Concorde was a beauty. Americans initially tried to stop it landing in New York, ostensibly because it was so noisy when taking off and landing and ascending. However a major reason was probably probably because British Airways (and not an American airline) was operating it. NZ is not so concerned about airline noise impinging on residents. There are plenty of nighttime flights over Auckland already. Population growth means flight paths are now over residential areas.

Concorde's seats weren't made for American obesity, economy sized seats for first class price

[Bjauck]

Concorde's seats weren't made for American obesity, economy sized seats for first class price
I have heard it called the toothpaste tube! From the publicity, Boom overture sounds more luxurious. A bit of an unfortunate name I think.

[Snow Leopard]

Just catching up with things. Keen to understand whether via the retail offer they will just grant a pro rata amount to enable holders to maintain percentage, or is there a chance they’d allow up to $150k regardless of current holding? Interested in views of seasoned experts here!

As I understand it at the moment, the retail offer is sized such that if small holders apply for a pro-rata amount (of approx 135 new shares per existing 1,000 ), subject to the NZD150K or AUD45K limits, then that can be achieved.

If you apply for more then you may get more depending upon the take-up rate.

Tomorrow may give more info and all will be revealed on allotment date.

[Santiago]

As I understand it at the moment, the retail offer is sized such that if small holders apply for a pro-rata amount (of approx 135 new shares per existing 1,000 ), subject to the NZD150K or AUD45K limits, then that can be achieved.

If you apply for more then you may get more depending upon the take-up rate.

Tomorrow may give more info and all will be revealed on allotment date.

Yep, makes sense. Many thanks for the response. I’d love to get more…

[ratkin]

Has everyone else not received a validation number yet?

[Toddy]

Haven't received anything yet.

[777]

Give them a chance.

[maclir]

Just got mine. Validation code that is. Will be participating, once DRP goes through next week.

[Toddy]

Yes, I have now received the email. Now I need to work out the most cost effective way for funding.

I can think clearly on the tractor mulching in the beautiful sun here in the Bay today. The mighty Chiefs also bring a smile.

[777]

Just got mine. Validation code that is. Will be participating, once DRP goes through next week.

The DRP shares next week won't make any difference to your entitlement if that is what you thinking.

[maclir]

The DRP shares next week won't make any difference to your entitlement if that is what you thinking.

So my entitlement will not be based on the shares I hold post-DRP, but those I held prior to that?

[huxley]

The record date was Friday, 14 June 2024? So that should mean it’s be based on the number of shares held on that date (is my understanding of the situation).

[warthog]

This is correct.

[warthog]

Haven't received anything yet.

Check spam.

Sent out in batches.

Hog received email around 11AM.

[Ggcc]

Ordered my full entitlements. I feel this is the best (safest investment) company on the NZX currently, but please DYOR

[warthog]

Ordered my full entitlements. I feel this is the best (safest investment) company on the NZX currently, but please DYOR

Some will no doubt be applying for more than their entitlement on the basis that some will either be disinclined or unable to contribute capital at this point, with the additional shares issued at a discount to market price.

[Bjauck]

Some will no doubt be applying for more than their entitlement on the basis that some will either be disinclined or unable to contribute capital at this point, with the additional shares issued at a discount to market price.
Infratil is already my largest holding by far now. I will be applying for less than half of my entitlement - Probably substantially less.

I regard IFT as multi-faceted infrastructure investment company - Hence more comfortable being overweight.

[RGR367]

Sold a bundle yesterday to take advantage of almost a dollar difference from the capital raise asking price. I will unload more if sp goes higher today.



disc: holder since 2015 with an overall acquisition price now of less than 150 :t_up:

[Bjauck]

Sold a bundle yesterday to take advantage of almost a dollar difference from the capital raise asking price. I will unload more if sp goes higher today.



disc: holder since 2015 with an overall acquisition price now of less than 150 :t_up: Would that complicate your tax position? Unless you are already a short term trader?

[RGR367]

Would that complicate your tax position? Unless you are already a short term trader?

I don't think so as I dispose stocks when I think I benefited well enough on them and it's not very often I do that especially on IFT. I think consider myself a long term investor/holder re my portfolio of shares.

[mshierlaw]

Infratil is already my largest holding by far now. I will be applying for less than half of my entitlement - Probably substantially less.

I regard IFT as multi-faceted infrastructure investment company - Hence more comfortable being overweight.

IFT is also my largest holding, thought the same way about not applying for all but when I read the offer document thru I have decided to apply for my full entitlement.

As you have to front up with the $$$$$ when you apply I shall wait till interest has been paid on those funds at the end of the month.

[Toddy]

Down 4.8 percent on close. Not sure what to make of it.

[Ggcc]

Down 4.8 percent on close. Not sure what to make of it.

Loads of shares dropped on close. MSCI index I think

[Snoopy]

"CDC is positioned for growth"

https://infratil.com/news/infratil-announces-nz1150-million-equity-raising/infratil-investor-presentation-nz1150-million-equity-raise/


Slide 23 of this presentation contains a series of PIE graphs, the last, on asset values, showing that fully 31% (Canberra Data Centres, or CDC) and 25% (OneNZ), a total of 56% of all assets held now are held under the broad-brush label of 'telecommunications'. Who would have thought that Infratil is mostly a Telco now? Certainly not me!

I am not an Infratil shareholder. But I am now forced to take an interest, due to the other telecommunications assets that I do hold (principally Spark and Telstra).

I observe that Telstra are up front with co-operative efforts with the big US players, Amazon Web Services
https://www.telstra.com.au/business-enterprise/products/cloud/solutions/amazon-aws

And Microsoft Azure
https://www.telstra.com.au/business-enterprise/products/cloud/solutions/microsoft-azure

However, there is no information on now Telstra intends to buddy up with Infratil 48% owned CDC. So I have to ask, is Infratil via CDC, really in the strong position that they say they are in?

Next I look at Slide 24 in the presentation. This shows existing data centres targetting an 8-10% return per annum. Data centres under construction targetting a return of 10-15% per annum, with those on the drawing board looking to achieve a return of 15-25% per annum. Why are CDC so confident that their returns will increase with the hyperscale data centres from AWS and Microsoft Azure coming into the picture?

Slide 27 shows rack utilisation rates of 75%, 66% and 83%. However, the footnote says that these numbers include 'white space' and 'reserved'. Apparently, the meaning of 'white space', a term I am not familiar with, is:

"White space in a data center refers to the main operational area where key computing hardware, including servers, storage systems, and networking devices, is housed. This area is considered the data center’s usable space, primarily occupied by IT equipment arranged in hot and cold aisles. Data center white space is usually measured in square feet or square meters."

So, it looks like by including 'white space', CDC is including space where data storage equipment 'could be put', without any commitment from customers for data centre equipment to actually be installed there. By doing this, and including reserved space where customers are committed of utilising data centre space, which is not up and running yet, it looks to me like CDC are grossly exaggerating the real utilisation percentage capacity of their data centres.

I guess 'build it and they will come' 'at ever increasing return rates' is an investment strategy. But this CDC growth plan is giving me a high reading on my BSometer.

SNOOPY

[Snoopy]

I am not an Infratil shareholder. But I am now forced to take an interest, due to the other telecommunications assets that I do hold (principally Spark and Telstra).


Moving to New Zealand now, CDC officially opened their two NZ data centres, in Silverdale (SD1) and Hobsonville (HV1), in August 2022.

From an article dated 27-01-2023:
https://www.nzherald.co.nz/business/aucklands-giant-new-data-centres-are-rising-the-staggering-power-theyll-chug/5V5GWXV5UVAFBOUQQMOGLV5JUU/
"For example, Canberra Data Centres (CDC) opened two 14MW hyperscale data centres in Auckland: one in Hobsonville and one in Silverdale, 28MW in total, for what it said was “an initial investment of more than $300 million”. And in January 2023, the firm said it had bought land to add another 12MW of capacity."
"So far, CDC’s twin centres are the largest hyperscale facilities in New Zealand - by default, given that they’re the first to build here in the supermassive hyperscale class - but competition is on the way."

"A $400m hyperscale data centre being built by Sydney-based DCI Data Centres at a 5.8-hectare site in Albany, bought for $66m from the Knight family, (who once wholesaled to garden centres). Ground was broken late last year (2022)".


Meanwhile what are Spark doing with their data centres?

---------------------

From Co-pilot AI with GPT-4 in Bing.
"Spark New Zealand has been actively investing in data centers as part of its three-year strategy. Here are some key points about their data center capacity:"

Takanini Data Center:

Spark completed a 10 MW expansion of its Takanini data center in August 2023. The Takanini facility utilizes a high-density contained aisle design, allowing for scalability up to and beyond 10 kW per rack, with maximum rack loads of up to 28 kW.

Overall Data Center Capacity:

Spark’s total data centre built capacity is expected to reach 22 MW in the current financial year (FY2024). They also have land held in existing sites for an additional 19 MW of capacity available for further development.

Market Position and Strategy:

Despite economic challenges, Spark has made solid progress implementing its strategy, including investments in data centers and 5G Standalone infrastructure. With the exponential growth in data, digitization, cloud adoption, and generative AI, demand for data center capacity is accelerating, and Spark aims to capture its share of this growing market.

---------------------

This means it looks like Spark, as of now, is operating at a very similar capacity to CDC, particularly when you take into account Spark's much higher capacity utilisation rate.

https://www.sharetrader.co.nz/showthread.php?9630-SPK-Spark-NZ-(TELCO)&p=1047453&viewfull=1#post1047453
"88% of total Spark data centre capacity is already committed under contract,"


https://www.reseller.co.nz/article/1294575/spark-targets-data-centres-ai-as-three-year-strategy-ends.html
"Spark, which reported its 2023 results in August, already operated the country’s most extensive network of customer data centres across 16 sites, with the ability to add additional capacity."

Next, there is a Microsoft Azure data centre under construction in Auckland, of unknown capacity, which was scheduled to go 'online' late in 2023.

https://www.nzherald.co.nz/business/aucklands-giant-new-data-centres-are-rising-the-staggering-power-theyll-chug/5V5GWXV5UVAFBOUQQMOGLV5JUU/
"Microsoft hasn’t put a price tag on the build, or detailed its specifications, other than to note that it’s above the Overseas Investment Office’s $100m threshold for approval. Anchor customers will include Fonterra, ASB, BNZ (which is taking the opportunity to move some 1000 apps to the cloud), ACC and Auckland Transport. The transport agency says the development will trim $2.5 million from its $50m per year IT budget and make it easier to add artificial intelligence capability to apps."

The 'Canberra Data Centre' has the inside running on many of the government databases in the Federal Capital of Australia. But do they have the same inside running here in NZ? I am not seeing it, although perhaps it is just that CDC are less 'shouty' about their specific achievements in NZ than Spark or Micrsoft?

SNOOPY

[Bjauck]

IFT is also my largest holding, thought the same way about not applying for all but when I read the offer document thru I have decided to apply for my full entitlement.

As you have to front up with the $$$$$ when you apply I shall wait till interest has been paid on those funds at the end of the month. It was certainly a good read! They do seem really positive on CDC’s potential. Half of my entitlement is fine. I am happy for other retail holders to have the rest if they want! I have been a holder since the float in the mid 1990’s (one of my first holdings.) So they have tapped me for quite a bit of funding over the years. It hasn’t all been plain sailing though.

[Bjauck]

Loads of shares dropped on close. MSCI index I think Friday night frights!

[maclir]

Slide 23 of this presentation contains a series of PIE graphs, the last, on asset values, showing that fully 31% (Canberra Data Centres, or CDC) and 25% (OneNZ), a total of 56% of all assets held now are held under the broad-brush label of 'telecommunications'. Who would have thought that Infratil is mostly a Telco now? Certainly not me!

I am not an Infratil shareholder. But I am now forced to take an interest, due to the other telecommunications assets that I do hold (principally Spark and Telstra).

I observe that Telstra are up front with co-operative efforts with the big US players, Amazon Web Services
https://www.telstra.com.au/business-enterprise/products/cloud/solutions/amazon-aws

And Microsoft Azure
https://www.telstra.com.au/business-enterprise/products/cloud/solutions/microsoft-azure

However, there is no information on now Telstra intends to buddy up with Infratil 48% owned CDC. So I have to ask, is Infratil via CDC, really in the strong position that they say they are in?

Next I look at Slide 24 in the presentation. This shows existing data centres targetting an 8-10% return per annum. Data centres under construction targetting a return of 10-15% per annum, with those on the drawing board looking to achieve a return of 15-25% per annum. Why are CDC so confident that their returns will increase with the hyperscale data centres from AWS and Microsoft Azure coming into the picture?

Slide 27 shows rack utilisation rates of 75%, 66% and 83%. However, the footnote says that these numbers include 'white space' and 'reserved'. Apparently, the meaning of 'white space', a term I am not familiar with, is:

"White space in a data center refers to the main operational area where key computing hardware, including servers, storage systems, and networking devices, is housed. This area is considered the data center’s usable space, primarily occupied by IT equipment arranged in hot and cold aisles. Data center white space is usually measured in square feet or square meters."

So, it looks like by including 'white space', CDC is including space where data storage equipment 'could be put', without any commitment from customers for data centre equipment to actually be installed there. By doing this, and including reserved space where customers are committed of utilising data centre space, which is not up and running yet, it looks to me like CDC are grossly exaggerating the real utilisation percentage capacity of their data centres.

I guess 'build it and they will come' 'at ever increasing return rates' is an investment strategy. But this CDC growth plan is giving me a high reading on my BSometer.

SNOOPY

You haven't read the document correctly. The 8-10% return is what Infratil targets for the 'core' business elements of its portfolio, this is not where the data centre business sits, you need to look at the next two categories Core Plus and Development and Growth.

[Snoopy]

You haven't read the document correctly. The 8-10% return is what Infratil targets for the 'core' business elements of its portfolio, this is not where the data centre business sits, you need to look at the next two categories Core Plus and Development and Growth.


Have a look at Slide 27 in the presentation maclir. This clearly shows elements of the data centre business in each of 'Core', 'Core Plus' and 'Development & Growth'. This suggests the data centre business is in all three operational categories, depending on the maturity of the particular data centre business unit in question.

SNOOPY

[huxley]

Just for fun, I asked a LLM:

What makes CDC data centers unique and what is stopping a competitor from replicating their business model?

CDC Data Centres stand out for several reasons:
Sovereign and Secure: CDC centers are highly secure and connected large-scale data centers across Australia and New Zealand. They prioritize security, ensuring that critical data remains protected.

Critical Infrastructure: Founded in 2007, CDC provides essential digital infrastructure that underpins security, social well-being, and economic progress in the region.

Agility and Growth: CDC has expanded through new campuses and increased capacity on existing ones, adapting to changing needs.

As for competitors replicating their model, a few factors might hinder them:

Expertise: CDC’s experience and expertise in data center development and operation are hard to replicate quickly.

Trust and Reputation: CDC’s track record with government and critical organizations builds trust, making it a preferred choice.

Geo-Connectivity: CDC’s interconnected campuses via redundant high-speed networks provide continuity for businesses.

However, competitors could still enter the market by investing in similar infrastructure and building their reputation over time. It’s a dynamic landscape! 😊

[mike2020]

Snoopy IFT target overall growth at 18% p.a. if I recall from their roadshow. Either that or they have achieved it. I might have been distracted by some very hypnotic graphs.

[Snoopy]

Just for fun, I asked a LLM:

What makes CDC data centers unique and what is stopping a competitor from replicating their business model?

CDC Data Centres stand out for several reasons:

Sovereign and Secure: CDC centers are highly secure and connected large-scale data centers across Australia and New Zealand. They prioritize security, ensuring that critical data remains protected.
Critical Infrastructure: Founded in 2007, CDC provides essential digital infrastructure that underpins security, social well-being, and economic progress in the region.
Agility and Growth: CDC has expanded through new campuses and increased capacity on existing ones, adapting to changing needs.

As for competitors replicating their model, a few factors might hinder them:

Expertise: CDC’s experience and expertise in data center development and operation are hard to replicate quickly.
Trust and Reputation: CDC’s track record with government and critical organizations builds trust, making it a preferred choice.
Geo-Connectivity: CDC’s interconnected campuses via redundant high-speed networks provide continuity for businesses.
However, competitors could still enter the market by investing in similar infrastructure and building their reputation over time. It’s a dynamic landscape! ��


I presume that in the early days, 'Canberra' Data Centres' had the inside running on various Australian Federal Government contracts. I guess there is something to be said for the Federal government using an 'Australian' outfit for essential infrastructure {despite NZ's Infratil owning nearly 50% of the company these days). Although I see in the growth outlook (slide 13) that once the under construction build program is complete, Canberra will consume 39MW. which will be only 1/10 th of the CDC built total. So, if the Australian Government contracts are no longer the 'bedrock earners' driving this company, I guess it means CDC have been able to upsell to others on their reputation?

CDC are driving themselves towards a 'carbon neutral' future. Having datacentres in NZ will help this. In fact. with the Auckland based facilities being so near the Trans-Tasman undersea data cable, there is nothing to stop the 'Auckland' data centres being primarily used to service Autralian based customers.

On the 'security' point, I don't see a great market for insecure data centres. Although we occasionally hear about data breaches, there doesn't seem to be a 'shame and blame culture' on the unfortunate hacked data centre operator. My guess is that other data centre operators realise they are only one step away from being hacked themselves. So, I am taking this super secure reputation that CDC are keen to promote with a grain of salt.

I don't accept the AI point that data centres are difficult to replicate quickly. AWS and Microsoft Azure have put a lie to that, given their significant build program down under. A track record of success with government and critical organizations will certainly help CDC. But since CDC aren't building a data centre in Wellington, maybe they are not targetting government departments in New Zealand as customers? I am not sure about the 'geo connectivity' advantage point. Is there a high-speed cable connecting Silverdale and Hobsonville? Given they are both in the same broad power supply district, I am unsure of what benefits such a cable might have.

With infrastructure there is usually an 'incumbant advantage'. I am not doubting CDC's business reputation in Australia. But in NZ they just look like 'one of many new boys' on the block. Where is the 'competitive advantage' of CDC's data centres in New Zealand? I am not seeing it.

SNOOPY

[Bjauck]

Snoopy IFT target overall growth at 18% p.a. if I recall from their roadshow. Either that or they have achieved it. I might have been distracted by some very hypnotic graphs.
I think 15% annual return had been a long-standing aim.

From the capital raising “presentation”: Infratil continues to target portfolio returns of 11-15% per annum (after fees) over a 10-year period and has achieved a total shareholder return of 18.7% since its inception in 1994.

There are certainly lots of photos, pie charts and colourful graphs with arrows pointing upwards! British Airport investments a distant memory?

[Ggcc]

https://www.nzherald.co.nz/business/power-problem-data-centre-growth-equivalent-to-demand-from-200000-homes/3UEOXD2YVNC5VG5ZRSQXM56OJI/

Just regarding data centres

[Snoopy]

I am not sure about the 'geo connectivity' advantage point. Is there a high-speed cable connecting Silverdale and Hobsonville? Given they are both in the same broad power supply district, I am unsure of what benefits such a cable might have.


Further to this, I see from slide 28 there is 'dark fibre connectivity' between Auckland and Sydney. My understanding of dark fibre is that it is up to the customer to put their own equipment on either end of the 'dark fibre' so that they can 'light it up' for their own purposes. My take on Slide 28 is that the dark fibre is actually the Southern Cross Cable and does not refer to anything owned by CDC. Happy to be corrected if I have read this wrongly.

SNOOPY

[Bjauck]

https://www.nzherald.co.nz/business/power-problem-data-centre-growth-equivalent-to-demand-from-200000-homes/3UEOXD2YVNC5VG5ZRSQXM56OJI/

Just regarding data centres What with Tiwai Aluminium deals, the power companies should be a good investment? We just need to hope the wind keeps on gusting too.

[Bjauck]

As it is all about the increase data storage for AI. This is what the AI app on my phone came up with:

CDC Data Centres likely have a competitive advantage due to several factors:


1. **Strategic Location**: They have data centers in key locations across Australia and New Zealand, providing low latency and regional coverage to their clients.


2. **Security and Compliance**: They focus on high-security standards, appealing to government and enterprise clients that require stringent data protection and regulatory compliance.


3. **Scalability and Reliability**: CDC Data Centres offer scalable solutions with high reliability and uptime, which are critical for businesses that depend on continuous data access and operations.


4. **Sustainability**: Their commitment to sustainability, including energy-efficient operations and the use of renewable energy sources, aligns with the increasing corporate emphasis on environmental responsibility.


5. **Client Focus**: They provide tailored solutions and high levels of customer service, fostering strong relationships and client loyalty.


These factors collectively contribute to CDC Data Centres' competitive edge in the data center market.

[mike2020]

I think 15% annual return had been a long-standing aim.

From the capital raising “presentation”: Infratil continues to target portfolio returns of 11-15% per annum (after fees) over a 10-year period and has achieved a total shareholder return of 18.7% since its inception in 1994.

There are certainly lots of photos, pie charts and colourful graphs with arrows pointing upwards! British Airport investments a distant memory?
It was the spiral graphs they liked most and I felt like I needed more time to either grasp it or maybe find the hidden image.

[CrustyPlums]

Yes that will be it. They don't own an undersea cable. They could have capacity on SX, TGA or Hawaiki cable systems. All have a path between NZ and AU.

Oops sorry, I didn't add the quote from when Snoopy mentioned this a few posts back :)

[winner69]

Are these data centres power hungry and dependent on surety of supply?

Just that 0z seemed exposed to power generation shortfall from not enough gas production at the moment and NZ power supply always seems at risk.

Is this a risk to IFT operations?

Or do they just build their own generators and become self reliant?

[Snoopy]

Snoopy IFT target overall growth at 18% p.a. if I recall from their roadshow. Either that or they have achieved it. I might have been distracted by some very hypnotic graphs.

Slide 25 is showing a total shareholder return of 18.7% per year since inception. As the company gets bigger the same percentage increase per year gets harder to achieve. Yet over the last five years, the company has achieved a total shareholder return of 24.6% per annum, which is incredible. The slight downside to this is that most of these returns have been from independent valuations of existing business units, rather than sales 'at market'. And valuations have assumptions, like growth rate discount rate etc. etc. . I am not wanting to cast aspersions on the valuers here, who I am sure have done a thoroughly professional job. But to better understand this valuation process, the latest annual report makes interesting reading

From AR2024 p34:
"Infratil’s investment in CDC is now valued between A$3.8 billion to A$4.4 billion, up from A$3.1 billion to A$3.7 billion 12 months earlier. This valuation increase reflects the significant additional demand and future development pipeline added over the course of the year, somewhat offset by an increase in the required return to take account of the increased risk profile associated with developing at scale. The independent valuation assumes 1,220MW of total built capacity, up from 585MW 12 months earlier. This
consists of 268MW operating capacity, 416MW under construction and 536MW classified as future builds."

I read that as the total current pipeline of data centre construction for some years into the future, being already priced into today's returns. I thought it interesting that the valuers even admit that their valuation is based on the 'build it and customers will come' business scenario, (when talking about the extra risks of developing at scale).

So am I saying that this 'return' Infratil shareholders have had these last few years is all BS? No, I am not saying that. But I do question the ability of valuers to realistically value a data centre portfolio when the total data centre capacity from all market players to come up for commissioning in the near term will increase total market data centre capacity by 500%.

SNOOPY

[Snoopy]

I think 15% annual return had been a long-standing aim.

From the capital raising “presentation”: Infratil continues to target portfolio returns of 11-15% per annum (after fees) over a 10-year period and has achieved a total shareholder return of 18.7% since its inception in 1994.

There are certainly lots of photos, pie charts and colourful graphs with arrows pointing upwards! British Airport investments a distant memory?


I think with hindsight we can forgive the European Airport fiasco. Infratil was coming off a very rewarding period of investing in Wellington Airport, which I recall some 20-25 years ago was known for having more flight movements than Auckland (albeit not more passengers as on average the planes using Wellington Airport were smaller.) With the growth in international tourism, I am not sure if that is still true today. But Wellington remains a 'busy little airport' nevertheless.

So I can see where the interest of investing in other 'secondary airports' came from. But as it turned out, those European Airports that Infratil chose to invest in did not have the same 'essential hub' characteristics that Wellington Airport has. We pay business people to take risks, and sometimes those risks do not pay off. That's business. And as long as management learn from their mistakes, I would be prepared to forgive them.

SNOOPY

[Bjauck]

I think with hindsight we can forgive the European Airport fiasco. Infratil was coming off a very rewarding period of investing in Wellington Airport, which I recall some 20-25 years ago was known for having more flight movements than Auckland (albeit not more passengers as on average the planes using Wellington Airport were smaller.) With the growth in international tourism, I am not sure if that is still true today. But Wellington remains a 'busy; little airport' nevertheless.

So I can see where the interest of investing in other 'secondary airports' came from. But as it turned out, those European Airports that Infratil chose to invest in did not have the same 'essential hub' characteristics that Wellington Airport has. We pay business people to take risks, and sometimes those risks do not pay off. That's business. And as long as management learn from their mistakes, I would be prepared to forgive them.

SNOOPY
Definitely Forgiven - but not forgotten! The global credit crunch did not help passenger numbers.

I think Ardmore has more plane and helicopter flight movements than Mangere too. Planes smaller and older though. A fair amount of new building there too. It does help to have pivotal or unique characteristics.

[Snoopy]

https://www.nzherald.co.nz/business/power-problem-data-centre-growth-equivalent-to-demand-from-200000-homes/3UEOXD2YVNC5VG5ZRSQXM56OJI/

Just regarding data centres

As the above reference reads. Projecting an incremental 500MW data centre power load from the generators over the next five years. The equivalent of 200,000 more houses in Auckland.



Are these data centres power hungry and dependent on surety of supply?


Yes



Just that 0z seemed exposed to power generation shortfall from not enough gas production at the moment and NZ power supply always seems at risk.

Is this a risk to IFT operations?

Or do they just build their own generators and become self reliant?


You would have to think a data centre operator would have a back up generator supply on site wouldn't you? Otherwise the whole case for being a 'reliable' data provider goes out the window. But upwards of 20MW as a back up generator on site sounds pretty big. I wonder how data centre providers do manage a 'power out' scenario? Anyone know?

SNOOPY

[Ggcc]

Are these data centres power hungry and dependent on surety of supply?

Just that 0z seemed exposed to power generation shortfall from not enough gas production at the moment and NZ power supply always seems at risk.

Is this a risk to IFT operations?

Or do they just build their own generators and become self reliant?

They don't build the sites until they have power supply. That was mentioned at the road show.

[Snoopy]

They don't build the sites until they have power supply. That was mentioned at the road show.


Yes but in fairness I don't think that is point Winner was getting at. He (and I) would like to know what happens when the contracted power supply goes down unexpectedly.

SNOOPY

[kiora]

Let google enlighten

https://kenshaw.com.au/case-study/canberra-data-centre-cdc-2018/

[Ggcc]

Yes but in fairness I don't think that is point Winner was getting at. He (and I) would like to know what happens when the contracted power supply goes down unexpectedly.

SNOOPY
Good point. I am guessing that there would be a penalty of some sort to the power company, as Infratil's customers will also have that built into their contracts. Power guarantee means exactly that.

[Snoopy]

Let google enlighten

https://kenshaw.com.au/case-study/canberra-data-centre-cdc-2018/

From the link
"CDC has also commissioned Kenshaw to install 4 x 2750kVA Cummins Generators with custom canopies in their brand-new Data centre due for completion in late 2018."

I wonder how big that datacentre in Australia was when it opened in late 2018? The reason I ask is that a 2750kVA Cummins Generator, might otherwise be reported as a 2.75MW Cummins generator. Four of those would produce 4x 2.75MW= 11MW.

That is not enough power to keep a more typically sized for today 20MW data centre on line. CDC would need 8 x 2750kVA Cummins Generators to support that. Crikey! I might have to buy some shares in Cummins!

SNOOPY

[Mrbuyit]

I'd say there would be a combination of UPS to keep the important things on for a period of time(and provide a clean power supply) as well as some smart load shedding to drop off the unimportant things.

[kiora]

In NZ
https://catalystcloud.nz/about/national-infrastructure/

[warthog]

Yes but in fairness I don't think that is point Winner was getting at. He (and I) would like to know what happens when the contracted power supply goes down unexpectedly.
SNOOPY

Ultimately all data centres will need to go to where the power is cheap and reliable, even if it is remote. If not remote, it makes sense for HPC to be colocated with rapid (15 second for example, or faster) curtailment activities such as Bitcoin mining. The overall HPC demand will be more than most people can even imagine, and that's with HPC technology advancement over time. It might take a boom and consolidation to sort this out just like the internet. Yes datacentres have backup which is typically diesel generators onsite but as battery technology improves over time we will see this gradually migrate to battery and with combination HPC-mining you have the best of all worlds.

[Bjauck]

From my AI app:

### Conclusion
While a power loss at a CDC Data Centre can have significant implications, the robust infrastructure and redundancy measures in place are designed to mitigate impact and ensure that services remain operational. These measures include UPS systems, backup generators, redundant power feeds, data replication, and comprehensive incident response plans. However, the efficiency of these systems can vary, and there may still be brief service interruptions or impacts depending on the specific circumstances and the effectiveness of the data center's contingency planning

[warthog]

From my AI app:

### Conclusion
While a power loss at a CDC Data Centre can have significant implications, the robust infrastructure and redundancy measures in place are designed to mitigate impact and ensure that services remain operational. These measures include UPS systems, backup generators, redundant power feeds, data replication, and comprehensive incident response plans. However, the efficiency of these systems can vary, and there may still be brief service interruptions or impacts depending on the specific circumstances and the effectiveness of the data center's contingency planning

AI/HPC is not resilient when it comes to power and so the market will stratify according to reliability of connectivity and power. Renewables without battery infrastructure does not lend itself to AI/HPC.

It may be the case that LLM analysis takes place in locations where power is reliable and cheap, and then deployed closer to where they are required.

[Bjauck]

From my AI app:
### Conclusion
The resilience of AI systems to data center power loss is achieved through a combination of redundancy, data replication, distributed computing, and robust backup systems. By leveraging UPS, backup generators, cloud solutions, and specific AI resilience strategies like checkpointing and stateless architecture, AI operations can maintain continuity and data integrity even in the face of power outages. These measures ensure that critical AI functions remain operational, mitigating the impact of data center power losses.

[warthog]

From my AI app:
### Conclusion
The resilience of AI systems to data center power loss is achieved through a combination of redundancy, data replication, distributed computing, and robust backup systems. By leveraging UPS, backup generators, cloud solutions, and specific AI resilience strategies like checkpointing and stateless architecture, AI operations can maintain continuity and data integrity even in the face of power outages. These measures ensure that critical AI functions remain operational, mitigating the impact of data center power losses.

What does it all mean?

Redundancy means you have more than you need in case you lose some.
Data replication means data redundancy.
Distributed computing means computing redundancy.
Robust backup systems means robust redundancy.
UPS is power backup.
Backup generators are power backup.
Cloud solutions mean something in a data centre or centres.
Checkpointing is computing redundancy (staged analysis/compute, so it can resume from the most recent point of failure)
Stateless architecture means separating the state from the compute, a form of compute redundancy.

The AI is trying to convince you that all of this redundancy will mitigate power loss. All fine and dandy in theory, but redundancy is expensive.

Most of this will be resolved in time.

Google, Microsoft and Apple already do a lot of this for their own compute but even with colossal budgets to throw at these problems, they still have plenty of outages.

[Bjauck]

I have turned my Hal off to a lullaby of “daisy!”

New technology and developments always come with risks. Refinement takes time. Going back to the aviation theme, the first commercial passenger jet, The comet, had horrendous accidents but over the years jet reliability and safety have improved. No doubt AI systems will have hiccups.

[warthog]

I have turned my Hal off to a lullaby of “daisy!”

New technology and developments always come with risks. Refinement takes time. Going back to the aviation theme, the first commercial passenger jet, The comet, had horrendous accidents but over the years jet reliability and safety have improved. No doubt AI systems will have hiccups.

"It might take a boom and consolidation to sort this out just like the internet."

15158

15159

[Baa_Baa]

This thread seems to have got off track with concerns about ongoing resilience to power outages, affecting IFT. Discussion seems to be mostly those concerned from who don't know about data centre availability.

While there is no doubt, Data Centres are vulnerable to 'long term' power outages, they are super resilient with numerous mitigations in place that are hard to explain to the lay person.

There is no doubt that a business who contractually relies on the "5 nines" 99.999% availability, doesn't have all the fail safe measures in place to guarantee that service.

[Snoopy]

Ultimately all data centres will need to go to where the power is cheap and reliable, even if it is remote. If not remote, it makes sense for HPC to be colocated with rapid (15 second for example, or faster) curtailment activities such as Bitcoin mining. The overall HPC demand will be more than most people can even imagine, and that's with HPC technology advancement over time. It might take a boom and consolidation to sort this out just like the internet. Yes datacentres have backup which is typically diesel generators onsite but as battery technology improves over time we will see this gradually migrate to battery and with combination HPC-mining you have the best of all worlds.


Reply relocated to a bitcoin thread.
https://www.sharetrader.co.nz/showthread.php?12705-Bitcoin-maximalist&p=1057819&viewfull=1#post1057819

SNOOPY

[Snoopy]

IMHO IFT remains the best placed risk adjusted public investment on NZX by a long shot. So many tail winds are in evidence, but particularly the AI growth into datacentre deployment, into data infrastructure growth and finally into green renewable energy demand. IFT sits across so many strong thematics / tail winds / growth areas. Beautifully positioned / poised!

Rate of increase in datacentre deployment in both CDC and KAO (not material in KAO but maturing nicely and is only a couple of years off of being very meaningful) is astonishing.
In active construction they appear to have more than 140% of existing capacity - that's not a pipeline, that's in active construction. The pipeline of owned sites plus the active construction is 350% increase against the existing deployed operational asset.


Assumption: I am assuming that because Infratil's investment in CDC is below 50%, CDC is not consolidated in the Infratil accounts.

I am framing my 'title question' from the point of view of new shareholders buying into IFT at 'book value' on the FY2024 balance date.

a/ Net Profit as Reported

From AR2024 p80, that is showing that the carrying value of CDC on the Infratil books is $1,403.4m.
The IFT Group share of NPAT, given IFT owns 48.24% of CDC, is 0.4824 x $201.9m= $97.40m

This means Infratil's investment in CDC is being carried on the books at a PE Ratio of $1,403.4/$97.40m = 14.4
Or looking at it another way, an earnings yield of $97.4m / $1,403.4 = 6.9%. (because Australian franking credits are not recognised in NZ, I guess this means that 6.9% is the 'gross earnings yield')

Given the touted growth prospects for CDC, both the PER and yield, as implied by book value, seem very reasonable.

b/ Net Profit as calculated

Muddying the water is slide 27 of the recent Infratil presentation.
https://infratil.com/news/infratil-announces-nz1150-million-equity-raising/infratil-investor-presentation-nz1150-million-equity-raise/
In that, the bar graph shows EDITDAF for CDC over FY2024 of $271m, of which I presume the Infratil share is 0.4824x$271m = $130.7m

Total IFT balance sheet assets for FY2024 sum to $16,109.9m. So in a 'total asset picture', the IFT stake in CDC represents only: $1,403.4m/$16.109.9m= 8.71% of all assets. The net financing expense over the FY2024 year was $366.7m. 8.71% of that figure is $31.9m. So I take $31.9m as 'allocated net interest' that must be offset against against any profit from holding CDC.

i/ We make an assessment that the depreciation and amortisation of CDC assets is systematically charged over 20 years (buildings will probably be more and computer equipment less) .
ii/ We guess that the CDC assets in operation today earn 10% on the original capital outlay. This means the price of assets on the books is $97.4m/0.1= $974m.

Now, 1/20th of that figure is $48.7m. Assuming 'F' (which is generally reserved for one off non-operational transactions), is zero, we can calculate the implied IFT share of NPAT from the EBITDAF figure quoted as follows:

0.7 x ($130.7m - $31.9m - $48.7m) = $35.1m

Comparison Conclusion

$35.1m is well below the $97.4m of NPAT implied in AR2024 on page 80. This could mean a couple of things.

i/ My estimates for 'I' and 'DA' are wrong - could be, I invite readers to comment on my assumptions OR
ii/ there is a large one off gain F which has increased the CDC profit over FY2024 (AR2024 page 80).

The term EBITDAF does not appear once in AR2024. So I am finding it very difficult to see what is going on here, and whether that $97.4m IFT share of CDC profits has been inflated by one offs. I do find it difficult to assess results when the same company publishes annual results using different yardsticks, for -in this case- CDC. Inconsistent reporting just leaves me the impression that the company that is issuing the results has something to hide. I am in the dark as to whether that $97.4m implied profit share from CDC to Infratil for FY2024 is to any extent sustainable or not.

SNOOPY

[forest]

If we make an assessment of the depreciation and amortisation of CDC assets is 20 years (buildings will probably be more and computer equipment less)

Hi Snoopy, I appreciate your detailed analysis as always. Just one thought, I am under the understanding that the clients leasing (often only parts of) a data centre own the computers. What a data centre leases out is a building with reliable electricity and cooling for the clients to put there equipment in.

[winner69]

Found this interesting ….from a Bloomberg

Data centers now consume more electricity than most countries

Out of 195 countries, only 16 countries consume more electricity than all the data centers of the world

And the demand for power by data centers will increase with more AI - driven data processing demand

[Snow Leopard]

15161

Many years ago I was in a Data Centre doing regular maintenance on a client's disaster recovery database.
At the near precise moment I hit the enter key to run a command there was a loud bang, all the room lights went out, the aircons stopped and there was only the gentle hum of the computers themselves.

For what seemed like a lifetime, but was actually 30 seconds, I stood there in the dark.

Then the generators kicked in, some lights came on, the cooling started to run again and all was well.

But I seriously thought I had caused it all for a few seconds.


Disc: Hold IFT & in on the capital raise
Disc: Caffe Latte made with Premium Sarawak Liberica beans.

[Snoopy]

Hi Snoopy, I appreciate your detailed analysis as always. Just one thought, I am under the understanding that the clients leasing (often only parts of) a data centre own the computers. What a data centre leases out is a building with reliable electricity and cooling for the clients to put there equipment in.


Hi Forest,

Appreciate your thoughts. You are right. But I think you are only covering one of the data centre business models out there. There are 'Public Data Centres' and 'Private Data Centres'. The way I remember 'which is which' is the philosophy of each named class of data centre follows the philosophy of the same names as they apply to the English school system.

Thus a 'Public Data Centre' is like a 'pay school' (private school in NZ) where 'you pay money' and accept whatever data access package the operator has available for you.
OTOH a 'Private Data Centre' is exactly what you describe. You rent space in a suitably powered and cooled 'outer shell', into which you install your own computer equipment.

The other option is 'hybrid storage' which is a mixture of private and public. That might suit a company with broad requirement for a data heavy back office workload, but one that still wishes to keep critical secure information on company owned servers.

My broad reading on the topic suggests that while 'Private Cloud' used to be the norm, the pendulum has now swung so that in terms of data centre capability, 'Public Cloud' now dominates. Certainly the international hyperscalers like AWS and Microsoft Azure require full control of their data centres and do not entertain 'Private Cloud'.
It is amongst this trend that the likes of Spark are looking to position themselves as hybrid cloud operators - not directly competing with the likes of AWS and Azure, so that Spark customers can choose, or not, to use their own computer equipment and in what proportion.

As a 'new kid on the block', in NZ at least, and a company that mentions 'scale' at every opportunity I had just assumed that CDC was a 'pure 'public cloud' operator. But my assumption could be wrong, especially as CDC has a much longer establishment timeline in their home market in Australia. If CDC are indeed more of a 'private cloud' operator, then Forest, you make a good point. But are they? Do any readers know?

SNOOPY

[ynot]

15161

Many years ago I was in a Data Centre doing regular maintenance on a client's disaster recovery database.
At the near precise moment I hit the enter key to run a command there was a loud bang, all the room lights went out, the aircons stopped and there was only the gentle hum of the computers themselves.

For what seemed like a lifetime, but was actually 30 seconds, I stood there in the dark.

Then the generators kicked in, some lights came on, the cooling started to run again and all was well.

But I seriously thought I had caused it all for a few seconds.


Disc: Hold IFT & in on the capital raise
Disc: Caffe Latte made with Premium Sarawak Liberica beans.

That coffee sounds interesting. Would you know if the green bean is available here.

[forest]

Hi Forest,

Appreciate your thoughts. You are right. But I think you are only covering one of the data centre business models out there. There are 'Public Data Centres' and 'Private Data Centres'. The way I remember 'which is which' is the philosophy of each named class of data centre follows the philosophy of the same names as they apply to the English school system.

Thus a 'Public Data Centre' is like a 'pay school' (private school in NZ) where 'you pay money' and accept whatever data access package the operator has available for you.
OTOH a 'Private Data Centre' is exactly what you describe. You rent space in a suitably powered and cooled 'outer shell', into which you install your own computer equipment.

The other option is 'hybrid storage' which is a mixture of private and public. That might suit a company with broad requirement for a data heavy back office workload, but one that still wishes to keep critical secure information on company owned servers.

My broad reading on the topic suggests that while 'Private Cloud' used to be the norm, the pendulum has now swung so that in terms of data centre capability, 'Public Cloud' now dominates. Certainly the international hyperscalers like AWS and Microsoft Azure require full control of their data centres and do not entertain 'Private Cloud'.
It is amongst this trend that the likes of Spark are looking to position themselves as hybrid cloud operators - not directly competing with the likes of AWS and Azure, so that Spark customers can choose, or not, to use their own computer equipment and in what proportion.

As a 'new kid on the block', in NZ at least, and a company that mentions 'scale' at every opportunity I had just assumed that CDC was a 'pure 'public cloud' operator. But my assumption could be wrong, especially as CDC has a much longer establishment timeline in their home market in Australia. If CDC are indeed more of a 'private cloud' operator, then Forest, you make a good point. But are they? Do any readers know?

SNOOPY

Hi Snoopy, I got my info from Matthew Ross, deputy CFO of infratil. I did not know there were other data centre business model so I assume CDC is indeed a 'private cloud' model.

[Ggcc]

Hi Forest,

Appreciate your thoughts. You are right. But I think you are only covering one of the data centre business models out there. There are 'Public Data Centres' and 'Private Data Centres'. The way I remember 'which is which' is the philosophy of each named class of data centre follows the philosophy of the same names as they apply to the English school system.

Thus a 'Public Data Centre' is like a 'pay school' (private school in NZ) where 'you pay money' and accept whatever data access package the operator has available for you.
OTOH a 'Private Data Centre' is exactly what you describe. You rent space in a suitably powered and cooled 'outer shell', into which you install your own computer equipment.

The other option is 'hybrid storage' which is a mixture of private and public. That might suit a company with broad requirement for a data heavy back office workload, but one that still wishes to keep critical secure information on company owned servers.

My broad reading on the topic suggests that while 'Private Cloud' used to be the norm, the pendulum has now swung so that in terms of data centre capability, 'Public Cloud' now dominates. Certainly the international hyperscalers like AWS and Microsoft Azure require full control of their data centres and do not entertain 'Private Cloud'.
It is amongst this trend that the likes of Spark are looking to position themselves as hybrid cloud operators - not directly competing with the likes of AWS and Azure, so that Spark customers can choose, or not, to use their own computer equipment and in what proportion.

As a 'new kid on the block', in NZ at least, and a company that mentions 'scale' at every opportunity I had just assumed that CDC was a 'pure 'public cloud' operator. But my assumption could be wrong, especially as CDC has a much longer establishment timeline in their home market in Australia. If CDC are indeed more of a 'private cloud' operator, then Forest, you make a good point. But are they? Do any readers know?

SNOOPY

Yes they only own the building and don’t own the hardware, other than the wires that hardware plug into in the building. They also have mentioned 30 year contracts, which sounds great.

[Snoopy]

Hi Snoopy, I got my info from Matthew Ross, deputy CFO of infratil. I did not know there were other data centre business model so I assume CDC is indeed a 'private cloud' model.


I had another look at the CDC website, forest.

https://cdc.com/services/data-centre-services/

Under the architecture and planning link it says this:
"Our expert team collaborates with you throughout the entire lifecycle, from the strategic planning of your data centre environment to the detailed solution architecture that encompasses the specific power density, cooling and interconnection of your ICT footprint."

The above sentence seems to indicate specific power density, cooling and interconnection are the services offered. Then they say of "your" rather than "our" ICT footprint integrates with that.
Maybe I am reading too much into the wording. As 'Your' ICT requirements could still reside on 'our' equipment. But what I have quoted does align with what Matthew Ross said to you, forest.

Yet it is hard to be sure of the truth when so many buzzwords are involved.

Sovereign.
"Protecting your long-term investment – through sovereign control of your data centre."

What does the above mean? Is King Charles personally in charge of looking after your data?


Secure.
"Protecting your critical assets – all CDC facilities are certified to the highest levels of security."

Again the above reads like nothing more than a slick marketing slogan, which means nothing under closer scrutiny. If they let customers install their own hardware and software, how do they know it is all done to the highest security level? Or are they speaking of something quite different to software security? Like a high fence and a full time security guard (which CDC do offer)?


Customisable.
"Configure your data centre your way – CDC provides flexible, modular and scalable solutions to future-proof your business."

A lesson in how to say nothing in as many words as possible? At first glance the above quote fits the narrative of a third party business bringing in their own hardware and software. But the heading say 'customisable'. This indicates to me there is a standard option which a user can choose or not to customise. And it implies to me the non-customised 'standard' option is supplied by CDC.

I don't think I have seen a business website less informative than 'cdc.com'. Why do they not come out and say straight what services they provide? Instead of meaningless marketing drivel that can be read any way the tide washes it?

SNOOPY

[Snoopy]

Yes they only own the building and don’t own the hardware l, other than the wires that hardware plug into in the building. They also have mentioned 30 year contracts, which sounds great.


Well I am surprised to hear this. I am not denying it is true, but do you have a source for this information? If true, it does explain why Telstra has no policy on dealing with CDC. Because if customer companies supply their own equipment, and CDC simply supplies the cabinets, that means there is no CDC to deal with from a Telstra perspective. Telstra must deal with the CDC customers individually.

If CDC is wholly a 'private data centre' model, that is very different to what AWS and Microsoft Azure are offering. In the past, running a 'Private Data Centre' was the only game in town. But has the data centre market evolved now?

Ggcc's explanation would also explain companies signing up for a 30 year lease. Who in their right mind would sign a deal with a technology company, locking them into incumbent technology for 30 years? Perhaps a company that doesn't sign away their future technology path? A company that still owns all of their own hardware and software assets?

SNOOPY

[Baa_Baa]

Snoopy has much to learn about the various types of data centres, what they provide, how they do it, what customers they target and why, and how their business models work. It is not at all clear why he is even remotely interested, except perhaps that IFT is a very very successful company.

[Snoopy]

I am not an Infratil shareholder. But I am now forced to take an interest, due to the other telecommunications assets that I do hold (principally Spark and Telstra).




Snoopy has much to learn about the various types of data centres, what they provide, how they do it, what customers they target and why, and how their business models work. It is not at all clear why he is even remotely interested, except perhaps that IFT is a very very successful company.


I have already told you why I am interested in CDC, when I started the series of posts that have gone places over the weekend (see above). From an NZ perspective, I am particularly interested in how CDC competes with Spark data centres. From what has come out so far, it seems that Spark see their USP as offering a 'hybrid' data centre, whereas CDC are fully focussed on 'private' data centres. So it isn't quite the 'clash of the titans' I thought it was. It looks like Spark and CDC have their own preferred data centre niches.

And for your information, I have never claimed to have a detailed knowledge of the data centre business models. I am here on this thread to learn about them from others who know more than me - which is the principal purpose of joining a forum like this in the first place, right?

SNOOPY

[kiora]

As a IFT shareholder from day dot I find the compounding growth model the most interesting and rewarding.
Very few companies on the NZX seem to manage to achieve it the way IFT has.
Some investors are more interested in dividends per se. even though dividends can come & go.

Return on invested capital is pertinant, for renewable Energy I suspect Longroad Rnergy has significantly higher returns than any other international firms competing in the same space eg Orsted
In parallel with Longroad Energy derisking their build pipeline through long term contracts.

Key : Derisk,leverage,higher returns

[Ggcc]

Well I am surprised to hear this. I am not denying it is true, but do you have a source for this information? If true, it does explain why Telstra has no policy on dealing with CDC. Because if customer companies supply their own equipment, and CDC simply supplies the cabinets, that means there is no CDC to deal with from a Telstra perspective. Telstra must deal with the CDC customers individually.

If CDC is wholly a 'private data centre' model, that is very different to what AWS and Microsoft Azure are offering. In the past, running a 'Private Data Centre' was the only game in town. But has the data centre market evolved now?

Ggcc's explanation would also explain companies signing up for a 30 year lease. Who in their right mind would sign a deal with a technology company, locking them into incumbent technology for 30 years? Perhaps a company that doesn't sign away their future technology path? A company that still owns all of their hardware and software assets?

SNOOPY
At the road shows they openly discuss about this. To be honest if one is in your town, just go past and take a look. The team are very approachable and they all know their stuff.

[ratkin]

I had an email from the share registry saying they had removed the funds from my account on Friday, yet nothing has been removed. Did anyone else experience the same thing, or have I given the wrong account number?

[warthog]

I had an email from the share registry saying they had removed the funds from my account on Friday, yet nothing has been removed. Did anyone else experience the same thing, or have I given the wrong account number?

Maybe you gave them the hog's account number? Funds gone! :cool:

But no email……:mellow:

Update: Monday 1244PM Email received.

[Ggcc]

email received and funds gone.

[Paint it Black]

It doesn't look like Jarden are helping to facilitate the Cap Raise? I would rather use my account with them to buy in than pay through my current account. Anyone know the reason why? ASB are doing this.

[Snoopy]

Assumption: I am assuming that because Infratil's investment in CDC is below 50%, CDC is not consolidated in the Infratil accounts.

I am framing my 'title question' from the point of view of new shareholders buying into IFT at 'book value' on the FY2024 balance date.

a/ Net Profit as Reported

From AR2024 p80, that is showing that the carrying value of CDC on the Infratil books is $1,403.4m.
The IFT Group share of NPAT, given IFT owns 48.24% of CDC, is 0.4824 x $201.9m= $97.40m

This means Infratil's investment in CDC is being carried on the books at a PE Ratio of $1,403.4/$97.40m = 14.4
Or looking at it another way, an earnings yield of $97.4m / $1,403.4 = 6.9%. (because Australian franking credits are not recognised in NZ, I guess this means that 6.9% is the 'gross earnings yield')

Given the touted growth prospects for CDC, both the PER and yield, as implied by book value, seem very reasonable.

b/ Net Profit as calculated

Muddying the water is slide 27 of the recent Infratil presentation.
https://infratil.com/news/infratil-announces-nz1150-million-equity-raising/infratil-investor-presentation-nz1150-million-equity-raise/
In that, the bar graph shows EDITDAF for CDC over FY2024 of $271m, of which I presume the Infratil share is 0.4824x$271m = $130.7m

Total IFT balance sheet assets for FY2024 sum to $16,109.9m. So in a 'total asset picture', the IFT stake in CDC represents only: $1,403.4m/$16.109.9m= 8.71% of all assets. The net financing expense over the FY2024 year was $366.7m. 8.71% of that figure is $31.9m. So I take $31.9m as 'allocated net interest' that must be offset against against any profit from holding CDC.

i/ We make an assessment that the depreciation and amortisation of CDC assets is systematically charged over 20 years (buildings will probably be more and computer equipment less) .

ii/ We guess that the CDC assets in operation today earn 10% on the original capital outlay. This means the price of assets on the books is $97.4m/0.1= $974m.

Now, 1/20th of that figure is $48.7m. Assuming 'F' (which is generally reserved for one off non-operational transactions), is zero, we can calculate the implied IFT share of NPAT from the EBITDAF figure quoted as follows:

0.7 x ($130.7m - $31.9m - $48.7m) = $35.1m

Comparison Conclusion

$35.1m is well below the $97.4m of NPAT implied in AR2024 on page 80. This could mean a couple of things.

i/ My estimates for 'I' and 'DA' are wrong - could be, I invite readers to comment on my assumptions OR
ii/ there is a large one off gain F which has increased the CDC profit over FY2024 (AR2024 page 80).

The term EBITDAF does not appear once in AR2024. So I am finding it very difficult to see what is going on here, and whether that $97.4m IFT share of CDC profits has been inflated by one offs. I do find it difficult to assess results when the same company publishes annual results using different yardsticks, for -in this case- CDC. Inconsistent reporting just leaves me the impression that the company that is issuing the results has something to hide. I am in the dark as to whether that $97.4m implied profit share from CDC to Infratil for FY2024 is to any extent sustainable or not.


Contrary to my assumptions, it now seems the collective wisdom of this thread is that CDC does not own the computing power housed in their data centres. They own the external shell and the inside cabinets and the wiring that connects everything up. But they do not own the computing power (the fastest depreciating bit). Those 'housed computers' are owned by customers. This realisation has changed my view of the depreciation schedule that will apply to each CDC data centre.

I am now going to push out my average depreciation time from 20 years to 40 years. The buildings may be on the books with a longer life than that, perhaps 50 years. But all of the cooling equipment will depreciate much faster than that. So I will stick with 40 years as a realistic compromise combined total depreciation schedule number. I expect amortisation will be zero over the period, as no goodwill would have been booked in the first place.

Recalculating Net Profit after revising depreciation

iib/ We guess that the CDC assets in operation today earn 10% on the original capital outlay. This means the price of assets on the books is $97.4m/0.1= $974m.

Now, 1/40th of that figure is $24.4m. Assuming 'F' (which is generally reserved for one off non-operational transactions), is zero, we can calculate the implied IFT share of NPAT from the EBITDAF figure quoted as follows:

0.7 x ($130.7m - $31.9m - $24.4m) = $52.1m

Despite lengthening the depreciation profile, $52.1m is still well behind the $97.4m NPAT, the share of CDC's profit owned by IFT actually achieved.

From p2 of the presentation
"EBITDAF represents net earnings before interest, tax, depreciation, amortisation, financial derivative movements, revaluations, gains or losses on the sales of investments, and excludes acquisition and sale related transaction costs and International Portfolio Incentive Fees."

If there were gains in the financial derivatives held by CDC, they could have increased CDC's declared profit, while not affecting the EBITDAF declaration in the Infratil presentation.
https://infratil.com/news/infratil-announces-nz1150-million-equity-raising/infratil-investor-presentation-nz1150-million-equity-raise/

Or (second possibility) perhaps CDC has revalued some of their assets higher, and boosted their declared profit via this path?

It is hard to know the answers to these questions, because the raw CDC accounts I have not seen released. Nevertheless the difference in 'declared profit' and 'calculated profit' cannot be explained by just assuming a meaningful change in the depreciation charge rate. I suspect there are some revaluation increases behind the scene, which the plebeian public shareholders in Infratil are not privy to. If so, this means shareholders are actually paying a higher price for the ongoing earning capability of CDC than they think they are.

SNOOPY

[kiora]

I imagine the Kings Ransom?

[kiora]

I wouldn't even try and decipher the wild swings lately.Sold down on volume Friday,brought up on volume today

Funds at play ?

[forest]

We guess that the CDC assets in operation today earn 10% on the original capital outlay. This means the price of assets on the books is $97.4m/0.1= $974m

Hi Snoopy, in the roadshow presentation from memory it was mentioned that CDC presently return between 10 and 15% on it's different assets, so 10% a bit low I think. Maybe halfway 12.5 % is a better estimate as a average.

[Snoopy]

Total IFT balance sheet assets for FY2024 sum to $16,109.9m. So in a 'total asset picture', the IFT stake in CDC represents only: $1,403.4m/$16.109.9m= 8.71% of all assets. The net financing expense over the FY2024 year was $366.7m. 8.71% of that figure is $31.9m. So I take $31.9m as 'allocated net interest' that must be offset against against any profit from holding CDC.

I am now going to push out my average depreciation time from 20 years to 40 years. The buildings may be on the books with a longer life than that, perhaps 50 years. But all of the cooling equipment will depreciate much faster than that. So I will stick with 40 years as a realistic compromise combined total depreciation schedule number. I expect amortisation will be zero over the period, as no goodwill would have been booked in the first place.

Recalculating Net Profit after revising depreciation

iib/ We guess that the CDC assets in operation today earn 10% on the original capital outlay. This means the price of assets on the books is $97.4m/0.1= $974m.

Now, 1/40th of that figure is $24.4m. Assuming 'F' (which is generally reserved for one off non-operational transactions), is zero, we can calculate the implied IFT share of NPAT from the EBITDAF figure quoted as follows:

0.7 x ($130.7m - $31.9m - $24.4m) = $52.1m

Despite lengthening the depreciation profile, $52.1m is still well behind the $97.4m NPAT, the share of CDC's profit owned by IFT actually achieved.


I reckon you guys give me too much rope.I publish tosh like the bold bit above and you let me get away with it? As an excuse for my error I blame Covid brain fog, plus the change in viewpoint (switching between the POV of Infratil and CDC) during the Infratil presentation
https://infratil.com/news/infratil-announces-nz1150-million-equity-raising/infratil-investor-presentation-nz1150-million-equity-raise/

So what is wrong with what I wrote? I was calculating an interest bill as part of the procedure to calculate NPAT from EBITDAF. Nothing wrong with that principle.But I was working off the net interest paid by Infratil, when I should have been using the net interest paid by CDC itself! Duh! I apologise for misleading.

CDC had approximately $A3bn in outstanding debt arrangements as at 1st December 2022.
https://www.thelawyermag.com/au/practice-areas/banking-and-finance/cdc-completes-3bn-debt-financing-and-capital-markets-issuance-with-gts-help/429195

Part of the refinancing package at the time included $A308m of US private placement (USPP) issuance. The above reference does not give any hint as to what the agreed interest rate might have been. Without this information I cannot calculate the interest rate bill at CDC. So any hints on where I can find such information, even a ballpark figure, would be most welcome.

Next we move onto the CDC funding strategy today (slide 14 of the referenced Infratil presentation).
"CDC has committed or undrawn liquidity of ~A$2.2bn following the recently executed ~A$860m USPP issuance (June 2024), weighted average tenor now ~5.7 year"

So what this is telling us is that, following a reshuffle to commit more debt to USPP the 'committed and undrawn facilities' are still about $A3bn 18 months down the track. there must be some reason to commit to USPP debt over Australian bank debt. So I am guessing that the total amount of USPP debt disclosed is equal to the complete amount of debt drawn: $A308m + $A860m = $A1,168m

Let's say that USPP funding was secured at a rate of 3% (a pure guess on my part). That means the annual interest bill for CDC would be: 0.03 x $A1,168m= $35m

And the Infratil share of that would be: 0.4824 x $35m = $16.9m

That is very different to the $31.9m (wrong) figure that I was using before. Lots of assumptions used. I am not really sure how good they are, so best I sleep on it before continuing.

SNOOPY

[Snoopy]

Snoopy wrote:
"We guess that the CDC assets in operation today earn 10% on the original capital outlay. This means the price of assets on the books is $97.4m/0.1= $974m"

Hi Snoopy, in the roadshow presentation from memory it was mentioned that CDC presently return between 10 and 15% on it's different assets, so 10% a bit low I think. Maybe halfway 12.5 % is a better estimate as a average.


Let's go with your suggestion forest, and see where that leads us: "This means the price of assets on the books is $97.4m/0.125= $780m"

Taking that $780m and depreciating it linearly over 40 years gives an annual depreciation and amortisation charge of: $780m/40= $19.5m

SNOOPY

[Snoopy]

I push out my average depreciation time from 20 years to 40 years. The buildings may be on the books with a longer life than that, perhaps 50 years. But all of the cooling equipment will depreciate much faster than that. So I will stick with 40 years as a realistic compromise combined total depreciation schedule number. I expect amortisation will be zero over the period, as no goodwill would have been booked in the first place.

Recalculating Net CDC Profit after once again revising depreciation and now interest charges

iic/ Let's say that USPP funding was secured at a rate of 3% (a pure guess on my part). That means the annual interest bill for CDC would be: 0.03 x $A1,168m= $35m
And the Infratil share of that would be: 0.4824 x $35m = $16.9m

We guess that the CDC assets in operation today earn 12.5% on the original capital outlay (refer post 3661). This means the price of assets on the books is $97.4m/0.125= $780m.

Now, 1/40th of that figure is $19.5m. Assuming 'F' (which is generally reserved for one off non-operational transactions), is zero, we can calculate the implied IFT share of NPAT from the EBITDAF figure quoted as follows:

0.7 x ($130.7m(1) - $16.9m - $19.5m) = $66.0m

(1) This calculation assumes that $130.7m is the Infratil share of the whole CDC EBITDAF profit. This is not clarified in the referred NZX presentation. https://infratil.com/news/infratil-announces-nz1150-million-equity-raising/infratil-investor-presentation-nz1150-million-equity-raise/

Despite lengthening the depreciation profile, and reducing the interest cost, $66.0m is still well behind the $97.4m NPAT, the share of CDC's profit owned by IFT actually achieved. So there are possibly still some undisclosed one off adjustments going on within the CDC accounts that outsiders are unaware of.

SNOOPY

[maclir]

Pretty sure the ATO has made some decisions on data centre depreciation, going through the different elements that can be found, floors, cooling, buidlings etc. Not sure about IRD.

[Snoopy]

I push out my average depreciation time from 20 years to 40 years. The buildings may be on the books with a longer life than that, perhaps 50 years. But all of the cooling equipment will depreciate much faster than that. So I will stick with 40 years as a realistic compromise combined total depreciation schedule number. I expect amortisation will be zero over the period, as no goodwill would have been booked in the first place.

Recalculating Net CDC Profit after once again revising depreciation and now interest charges

iic/ Let's say that USPP funding was secured at a rate of 3% (a pure guess on my part). That means the annual interest bill for CDC would be: 0.03 x $A1,168m= $35m
And the Infratil share of that would be: 0.4824 x $35m = $16.9m

We guess that the CDC assets in operation today earn 12.5% on the original capital outlay (refer post 3661). This means the price of assets on the books is $97.4m/0.125= $780m.

Now, 1/40th of that figure is $19.5m. Assuming 'F' (which is generally reserved for one off non-operational transactions), is zero, we can calculate the implied IFT share of NPAT from the EBITDAF figure quoted as follows:

0.7 x ($130.7m(1) - $16.9m - $19.5m) = $66.0m

(1) This calculation assumes that $130.7m is the Infratil share of the whole CDC EBITDAF profit. This is not clarified in the referred NZX presentation. https://infratil.com/news/infratil-announces-nz1150-million-equity-raising/infratil-investor-presentation-nz1150-million-equity-raise/


This is getting terribly frustrating. What started out with what I thought was a simple question "How much does a data centre earn?", has turned into a constantly rewriting presentation nightmare.

Recalculating Net CDC Profit after revising earnings

Cross referencing from AR2024 page 80, to the Infratil presentation slide 27 shows 'revenue for CDC' over FY2024 to be $NZ412.3m (AR2024) c.f. $A356m (Infratil Presentation) for the same reporting period. This implies an NZD to AUD exchange rate of $356m/$412.3m= 0.8643. Since the NZD/AUD exchange rate never approached that figure over FY2024, it looks like I am 'missing something'. Some foreign exchange futures contracts going the wrong way and upsetting the exchange rate picture perhaps? In any event, this suggests that 'presentation slide 27' is showing numbers that apply to the whole of CDC, not just the IFT 48.24% share. This means my 'earnings calculation' has to be adjusted again, to this:

iid/ 0.7 x (0.4824x$130.7m - $16.9m - $19.5m) = $18.7m

So I have gone backwards, getting even further away from the implied $94.7m Infratil share of CDC profit, implied by AR2024. Sigh!

The next point of bafflement is to explain why EBITDAF at CDC increased from $A215m to $A271m between FY2023 and FY2024 (slide 27), while the net surplus after tax declined from $NZ762.7m to $NZ201.9m over the same period (AR2024 p80).

SNOOPY

[Snoopy]

Pretty sure the ATO has made some decisions on data centre depreciation, going through the different elements that can be found, floors, cooling, buildings etc. Not sure about IRD.


Yes I am sure you are right about the the ATO I don't see any reason why NZ's IRD would not be 'on the ball' in the same way. The ironic thing is the 'removal of structural building depreciation' as a tax deductible item in NZ could mean that despite Australia being nominally a 'higher taxed' 'higher cost' tax residency, it might be cheaper for CDC to own their NZ properties on their Australian tax book now. Perhaps an unforeseen consequence of changing the NZ building tax depreciation regime?

SNOOPY

[Snoopy]

The next point of bafflement is to explain why EBITDAF at CDC increased from $A215m to $A271m between FY2023 and FY2024 (slide 27), while the net surplus after tax declined from $NZ762.7m to $NZ201.9m over the same period (AR2024 p80).


I reckon I can make a fist of unravelling this one. Since NPAT must always be less that EBITDAF, except for the 'one offs', the FY2023 NPAT must contain a lot of 'one offs', (like a revaluation upwards of the whole portfolio)? I would guess that new expenditure on new data centres would be capitalised. So I don't think that 'the intent to build more data centres at scale' and 'executing such a plan' should mean that such increased expenditure would necessarily force declared profits down.

SNOOPY

[Bjauck]

Yes I am sure you are right about the the ATO I don't see any reason why NZ's IRD would not be 'on the ball' in the same way. The ironic thing is the 'removal of structural building depreciation' as a tax deductible item in NZ could mean that despite Australia being nominally a 'higher taxed' 'higher cost' tax residency, it might be cheaper for CDC to own their NZ properties on their Australian tax book now. Perhaps an unforeseen consequence of changing the NZ building tax depreciation regime?

SNOOPY That is an interesting point. By avoiding the elephant in the room a CGT, as well as depreciation, NZ has some other taxes - financial arrangements rules, FIF etc. - to bring to income what many other jurisdiction do not.

[Snoopy]

CDC had approximately $A3bn in outstanding debt arrangements as at 1st December 2022.
https://www.thelawyermag.com/au/practice-areas/banking-and-finance/cdc-completes-3bn-debt-financing-and-capital-markets-issuance-with-gts-help/429195

Part of the refinancing package at the time included $A308m of US private placement (USPP) issuance. The above reference does not give any hint as to what the agreed interest rate might have been. Without this information I cannot calculate the interest rate bill at CDC. So any hints on where I can find such information, even a ballpark figure, would be most welcome.

Next we move onto the CDC funding strategy today (slide 14 of the referenced Infratil presentation).
"CDC has committed or undrawn liquidity of ~A$2.2bn following the recently executed ~A$860m USPP issuance (June 2024), weighted average tenor now ~5.7 year"

So what this is telling us is that, following a reshuffle to commit more debt to USPP the 'committed and undrawn facilities' are still about $A3bn 18 months down the track. there must be some reason to commit to USPP debt over Australian bank debt. So I am guessing that the total amount of USPP debt disclosed is equal to the complete amount of debt drawn: $A308m + $A860m = $A1,168m

Let's say that USPP funding was secured at a rate of 3% (a pure guess on my part). That means the annual interest bill for CDC would be: 0.03 x $A1,168m= $35m

And the Infratil share of that would be: 0.4824 x $35m = $16.9m

That is very different to the $31.9m (wrong) figure that I was using before. Lots of assumptions used. I am not really sure how good they are, so best I sleep on it before continuing.


Trying to work out a gearing ratio when you aren't given a balance sheet is an interesting exercise. In the case of CDC we are given partial information in Infratil AR2024 (31st Match 2024 balance date) p80. More clues are in the June 2024 Infratil capital raising presentation.
https://infratil.com/news/infratil-announces-nz1150-million-equity-raising/infratil-investor-presentation-nz1150-million-equity-raise/

The report timing differences between the two references means we can't be sure that we can take data from one report and be sure it is current for the other. But AR2024 shows for CDC:

Total Assets: $6,820.7m
Total Liabilities: $4,251.1m
Net Assets: $2,575.6m

This gives a CDC debt ratio of: $4,251.1m/$6,820.7m = 62.3%

Go to the presentation, slide 14, and a 'CDC key metric' is 7-10 times leverage (the ratio of a company's loan capital (debt) to the value of its ordinary shares (equity) ). This implies a debt ratio of between 7/8= 87.5% and 10/11= 90.9%.

Stacking up the 'key metric' debt ratio range against the actual debt ratio, it looks like 'the plan' for CDC is to borrow a lot more money. And that was before the equity injection (of which Infratil's share is expected to be $600m - ref slide 14) from the capital raise arrives, which should allow CDC to borrow even more!

Given all of this, my guesstimate of the total borrowed capital by CDC of $1,168m (post 3662, referred above) at EOFY2024 looks very light. I find it confusing when a company talks about 'borrowing facilities', because such a number just means that such facilities are available. It doesn't mean that they have been drawn down to the maximum amount. But some presentations do not make it clear which number (debt which can be drawn vs debt that is drawn) is being talked about. Nevertheless balance sheets, or the scant information we have from them (AR2024 p80) do not lie. And even if the total declared liability balance, $4,251.1m, is all long term bank or USPP debt (there isn't enough detail disclosed to know this), in the big picture, CDC regards that as 'conservative' (!).

In most companies with a high debt ratio of 62%, which management were seeking to increase further to near 90%, this would be a big red flag for me. However, Infratil is a very skilled manager of long term infrastructure assets. The 30 year data centre contracts that Infratil, via CDC, is able to write gives a secure cashflow from what is a largely recession resistant asset class. And if CDC have a secure cashflow over a long time period, then this allows the company debt profile to be leveraged up with greater safety.

SNOOPY

[Snoopy]

My average depreciation time remains at 40 years. The buildings may be on the books with a longer life than that, perhaps 50 years. But all of the cooling equipment will depreciate much faster than 40 years. So 40 years is my compromise 'combined total depreciation schedule number'. Amortisation is assumed to be be zero over the period, as no goodwill would have been booked on the balance sheet for a 'green field build' data centre.

Recalculating Net CDC Profit after once again revising interest charges

iie/ Total debt, assumed as a constant value across the year was $4,251.1m. Let's say that USPP funding and other bank funding was secured at a rate of 3% (a pure guess on my part). That means the annual interest bill for CDC would be: 0.03 x $A4,251.1m= $127.5m

And the Infratil share of that would be: 0.4824 x $127.5m = $61.5m

We guess that the CDC assets in operation today earn 12.5% on the original capital outlay (refer post 3661). This means the price of assets on the books is $97.4m/0.125= $780m.

Now, 1/40th of that figure is $19.5m. Assuming 'F' (which is generally reserved to symbolise one off non-operational transactions), needs no further adjustment, we can calculate the implied IFT share of NPAT from the EBITDAF figure quoted as follows:

0.7 x (0.4824x$130.7m - $61.5m - $19.5m) = -$12.6m

I have lengthened the depreciation profile, and increased the interest cost to something more realistic, now that I have realsed the debt burden at CDC is much greater than I had previously thought, The result is that the net profit I thought I had, has turned into an operational loss (-$12.6m). Yet the declared profit was +$97.4m NPAT, the share of CDC's profit owned by IFT actually achieved. Despite this being my fifth attempt at calculating it, I am not guaranteeing that I have got my operational profit calculation right. But even with some more imagined future tweaks, I see no way to turn a $12.6 loss into a $97.4m profit.

The loss is determined by the gearing of CDC which will have been decided upon by Infratil and its ownership partners. My inkling is that CDC has been designed as a company with near zero earnings for tax reasons. It could easily become profitable by having less debt in its underlying structure. But to avoid paying back some of Infratil's injected capital as a 'tax bill', Infratil have kept the interest bill high. This is what accountants call 'tax efficiency'. So it looks like CDC is losing money, or making a very modest profit on 'normal operations'. I certainly would not have predicted that, prior to me tackling this calculation, starting at the weekend just gone.

SNOOPY

[kiora]

There being a lot/too many asumptions there I'd say

One of my collegues always said assumptions are the MOAF

[Snoopy]

There being a lot/too many asumptions there I'd say

One of my collegues always said assumptions are the MOAF

Assumptions are there to be challenged, which is why if you use assumptions, you should always document what they are. If you think one or more of the assumptions that I have used should be different, then feel free to suggest.

SNOOPY

[LaserEyeKiwi]

Wellington council confirms sale of its Wellington Airport holding will proceed (there was a last minute challenge to reconsider)

[Ggcc]

Wellington council confirms sale of its Wellington Airport holding will proceed (there was a last minute challenge to reconsider)

https://www.rnz.co.nz/news/political/520673/bid-to-stop-wellington-airport-share-sale-fails

[Toddy]

Wellington council confirms sale of its Wellington Airport holding will proceed (there was a last minute challenge to reconsider)

Excellent outcome. WCC was a terrible partner to be in business with.

Im looking forward to seeing what the new ownership structure will look like. Whether or not it's IFT on its own, or a partner with big pockets.

[Ggcc]

Excellent outcome. WCC was a terrible partner to be in business with.

Im looking forward to seeing what the new ownership structure will look like. Whether or not it's IFT on its own, or a partner with big pockets.
At the road show it was mentioned that they had a good working relationship with WCC and it was positive to keep them as shareholders. Although if they wished to sell their shares at the right price IFT would be keen to buy. Personally it may become a new NZX float if WCC want too much for it and IFT could benefit that way and slowly sell off their shares onto the NZX together with WCC. Positive for IFT either which way.

[Snoopy]

Recalculating Net CDC Profit after once again revising interest charges

iie/ 0.7 x (0.4824x$130.7m - $61.5m - $19.5m) = -$12.6m

I have lengthened the depreciation profile, and increased the interest cost to something more realistic, now that I have realsed the debt burden at CDC is much greater than I had previously thought, The result is that the net profit I thought I had, has turned into an operational loss (-$12.6m). Yet the declared profit was +$97.4m NPAT, the share of CDC's profit owned by IFT actually achieved.


At this point, some readers may think I have disappeared down an 'analysis rabbit hole', desperate to justify my belief that CDC is losing $12.6m per year, when the implied published actual equivalent figure as derived from the annual report shows a CDC profit of $97.4m for the year. So I have obviously 'lost it'. But actually I believe both figures can be correct, even if they are not obviously reconcilable. Let me explain.

There are different ways to measure profit. In the case of CDC, as far as Infratil is concerned, their interest in CDC is a minority owned equity stake. Also CDC is not listed. So CDC does not have an independently determined 'market value' which Infratil can 'mark to market'. But according to p26 of the capital raising document.
https://infratil.com/news/infratil-announces-nz1150-million-equity-raising/infratil-investor-presentation-nz1150-million-equity-raise/

The value of CDC has risen by: $4,419.7m - $3,678.7m = $741m (the value of Infratil's gain being 0.4824 x $741m = $357m)

So if the gain in value at CDC of $741m, was not an underlying value change as determined by 'Mr Market', where did the gain come from? Look in the very small print at the bottom of p6 in the presentation and you will find the answer.

"2. Infratil Portfolio asset value represents the independent valuation of Infratil’s equity ownership or book value of its portfolio companies."

This is how I read that statement. Infratil hired some clever company valuation boffins, appointed them as consultants for CDC, and laid out the future forecast cashflows of CDC: Not only the 302MW of current datacentre capacity but also the 388MW under construction across the current footprint, and the 400kW of advance capacity expected to come on line in the next 4-5 years and the acceleration of the Marsden Park campus project in Sydney. Thus the 'value' of CDC is not derived solely from the profitability of the cashflow from the existing 302MW of data centres. That is merely one ingredient. Subsuming that cashflow will be the cashflow from the additional 1,870MW - 302MW = 1,568MW of data centre power that is planned to come on line. Of course being 'future capacity', the present day value of this expansion will be discounted back in present day valuation terms. But it still represents a large jump in modelled cashflows, compared to what would have been modelled if only the future cashflows of datacentres already built, and clients already signed, were used.

The way I look at it, CDC have already eaten their own future when they claim an increase in value of $741m over the year. Some of this embedded future value is from data centres not built and clients not signed. But current market signals are such that where the new data centres are built, clients will be clamouring to sign up. So these gains are not yet real in cashflow terms. They are just based on expectations of where the valuation boffins expect cashflows to go.

Infratil shareholders will not find these matters discussed like I have just done here in the annual report. That is because CDC is a private company, and Infratil shareholders are treated as 'CDC outsiders', only fed the information CDC sees fit to hand out to them. One of those information tidbits is the $741m gain in CDCs valuation over the year - a nice positive piece of headline information, which sounds fantastic. But I wonder how many Infratil shareholders have cottoned onto the fact that ten years of growth are likely already incorporated into that valuation change? Don't get me wrong, I am not suggesting the valuation boffins are idiots, or wrong. If the business plan pans out, that $741m increase in value will become real. But right now I would suggest that $741m incremental increase in value is not real, it is merely a 'well researched promise'.

In summary, the profitability of CDC in its 'state of the present' in 2024 is very different to the discounted future cashflow valuation when the full cashflow picture has been laid out over ten years or more. A discounted cashflow model change can be capitalised into a 'lump sum gain'. And I believe this is what has occurred over FY2024. If an equity investment in which Infratil owns a minority stake increases by $741m, then Infratil is duty bound to record their percentage ownership in the value of that stake as a 'profit'. This is just how equity accounting works. But does that share of the $721m gain over FY2024 from ownership of the CDC stake say anything about cashflows that have been improving (or not) over the 2024 financial year? I would say it doesn't. Thus for CDC we can say that 'declared profit' and 'operational profit' are largely unrelated numbers. And this is why I can claim the respective Infratil share of operational profit (actually a loss) at CDC over FY2024 was -$12.6m, even though the equivalent 'declared profit' over the same time period was +$97.4m, and bears little relation to that other figure.

SNOOPY

[winner69]

WCC business acumen is zilch …they’ll give it away

Ex Infratil guy Tim Brown voted in favour (of Long Term Plan) of sale


Sale no certainty ……working on options and talked about again December apparently

[Toddy]

At the road show it was mentioned that they had a good working relationship with WCC and it was positive to keep them as shareholders. Although if they wished to sell their shares at the right price IFT would be keen to buy. Personally it may become a new NZX float if WCC want too much for it and IFT could benefit that way and slowly sell off their shares onto the NZX together with WCC. Positive for IFT either which way.

IFT still have to cuddle up to the Council until any deal is done. So they are always going to say that they are great.

[Pegasus2000]

Thanks Snoopy for your own research and view.

[Snoopy]

Recalculating Net CDC Profit after once again revising interest charges

iie/ Total debt, assumed as a constant value across the year was $4,251.1m. Let's say that USPP funding and other bank funding was secured at a rate of 3% (a pure guess on my part). That means the annual interest bill for CDC would be: 0.03 x $A4,251.1m= $127.5m

And the Infratil share of that would be: 0.4824 x $127.5m = $61.5m

We guess that the CDC assets in operation today earn 12.5% on the original capital outlay (refer post 3661). This means the price of assets on the books is $97.4m/0.125= $780m.

Now, 1/40th of that figure is $19.5m. Assuming 'F' (which is generally reserved to symbolise one off non-operational transactions), needs no further adjustment, we can calculate the implied IFT share of NPAT from the EBITDAF figure quoted as follows:

0.7 x (0.4824x$130.7m - $61.5m - $19.5m) = -$12.6m

The loss is determined by the gearing of CDC which will have been decided upon by Infratil and its ownership partners. My inkling is that CDC has been designed as a company with near zero earnings for tax reasons. It could easily become profitable by having less debt in its underlying structure. But to avoid paying back some of Infratil's injected capital as a 'tax bill', Infratil have kept the interest bill high. This is what accountants call 'tax efficiency'. So it looks like CDC is losing money, or making a very modest profit on 'normal operations'. I certainly would not have predicted that, prior to me tackling this calculation, starting at the weekend just gone.



One thing I did not comment on in my NPAT calculation on CDC was the cashflow position. Depreciation is a non cash item. And apart from a little routine maintenance, I would predict very little Capex is required to keep these new 'Cooling Buildings' in tip top shape for at least a dozen years. Despite the $12.5m 'operational loss' I have deduced that CDC made on its data centres over FY2024, by contrast, the cashflow position is positive.

0.7 x (0.4824x$130.7m - $61.5m) = $1.1m

Think for a moment how advantageous this is for Infratil, via CDC. CDC gets a tax refund of some 0.3 x $12.6m = $3.8m per year. They can use that money, plus the $1.1m of positive cashflow each year to help play their hefty interest bill. But, best of all, because no income tax is due, all of the share capital that has been put into CDC to develop that business can be retained within that company. No capital needs to be paid back as tax. This showcases how smart those financial engineers at Infratil really are, keeping the business model as 'capital light' for shareholders as they can..

SNOOPY

[Ferg]

Snoopy - I suspect you are not getting pushback on your analyses because they are possibly viewed as paralysis by analysis and, as kiora pointed out, they are full of unproven assumptions. Take for example the latest post - you assume the $741m was all revaluation gains.....do you have confirmation of this? Aren't CDC building additional capacity? If so, how is that funded....is IFT injecting additional capital? Any such equity injections are not revaluations.

[Snoopy]

Snoopy - I suspect you are not getting pushback on your analyses because they are possibly viewed as paralysis by analysis and, as kiora pointed out, they are full of unproven assumptions.


My main aim with assumptions is to be 'ballpark right' rather than 'absolutely wrong'. Take for example my assumed 'debt interest rate' of 3%. That seems rather low to me. But if Infratil are using a US private placement debt funding program with suitable hedging in place, maybe it is possible? But what if I were to assume 4% instead? All that would do is increase the interest rate charge, and plunge the business into a deeper loss on an operational net profit basis. And remember, the whole purpose of such a change would be to try and get a closer match between my calculated attributable profit ( -$12.6m) and the declared attributable profit of $97.4m. Charging a higher interest rate makes the two numbers further apart! I am going in the wrong direction. So why don't I go the other way and assume $4,251.1m of debt is funded at a mere 1.5% interest change. How realistic does that sound? Not very realistic to me. But it would chop the interest bill in half, So what would that do to the Infratil share of projected profit?

0.7 x (0.4824x$130.7m - $30.75m - $19.5m) = $9.0m

$9.0m is still a whole order of magnitude lower than the $97.4m I am trying to emulate. So what my 'perturbation analysis' is telling me is that there is no way I can manipulate interest rates (nor depreciation charges) within any reasonable range to get the answer I am after.



Take for example the latest post - you assume the $741m was all revaluation gains.....do you have confirmation of this? Aren't CDC building additional capacity? If so, how is that funded....is IFT injecting additional capital? Any such equity injections are not revaluations.


'Confirmation' is found in the first half answer to this post. Possible alternative explanations do not add up. There is no way the $741m in gains can come from a business in its build up phase that is probably increasing its losses. There is also no way that if we take this years affiliated CDC profit at a face value of $97.4m, that this could have resulted in an increase in the value of Infratil's CDC stake over the year. Because declared profits at CDC between FY2023 and FY2024 fell by 70%. (AR2024 p80)

You are correct that the $741m asset write up might not have all been revaluation gains. As you say, that figure may include actual new data centres built during the year. But I put it to you that such a fact doesn't change the overall argument one jot, Whether the $741m in gains were as a result of existing assets being valued more highly, or new assets moved into the mix, or the promise of potential new assets that might be moved into the asset mix doesn't matter. The fact is independent assets valuers have looked at the total and potential CDC data centre portfolio at EOFY2024 and decided it is worth $741m more than a year earlier.

Any concomitant increase in value on the Infratil balance sheet is just listed as an increase in value of equity investments, because Infratil is a minority shareholder in CDC equity. As far as Infratil shareholders are concerned, for reporting purposes CDC is simply a 'black box'. Whatever the mechanism by which CDC went up in value by $741m 'should be of no concern to them'.

SNOOPY

[Baa_Baa]

Snoopy - I suspect you are not getting pushback on your analyses because they are possibly viewed as paralysis by analysis and, as kiora pointed out, they are full of unproven assumptions.

I think it might be because Snoopy has a hypothesis that IFT/CDC is a poor business and investment proposition, and is murdering the financials to prove it to himself and anyone else who is interested, that that is the case.

If I was going to do something like this, which admittedly I probably couldn't as I don't have the financial accounting dexterity or time to explore all sorts of extrapolations, neither do I have reason or cause to think IFT are lying or manipulating the financials, I would do all of my homework offline, build a case that I thought was rock solid, and then present it for discussion.

Rather than make myself look a bit foolish with multiple fabrications and reinterpretations of the numbers, and each of them ending in oops.

I would probably also just give the CFO a call and say, hey, I don't believe the numbers you've presented and I want to run some of my analysis past you which suggests you're -$100m wrong and CDC is a loss maker, and ask a few questions, before I make a fool of myself on social media.

[Ferg]

Fair point Baa_Baa - better as you say to learn offline. Plus page 80 of IFT AR 2024 has the real numbers, as does pages 24-27. I can't believe someone would say the numbers are not correct or real without understanding the mechanics. For instance, land used for business A can be worth a different amount when used for business B (e.g. farm land used for stock versus the same farm land used for crops or orchards, or maybe even used for a data centre!). In addition, IFRS allows the capitalisation of holding costs such as interest for developments that take some time to come online so rather than jump to "the numbers must be wrong" - better to say "what am I not understanding?".

[warthog]

I think it might be because Snoopy has a hypothesis that IFT/CDC is a poor business and investment proposition, and is murdering the financials to prove it to himself and anyone else who is interested, that that is the case.

If I was going to do something like this, which admittedly I probably couldn't as I don't have the financial accounting dexterity or time to explore all sorts of extrapolations, neither do I have reason or cause to think IFT are lying or manipulating the financials, I would do all of my homework offline, build a case that I thought was rock solid, and then present it for discussion.

Rather than make myself look a bit foolish with multiple fabrications and reinterpretations of the numbers, and each of them ending in oops.

I would probably also just give the CFO a call and say, hey, I don't believe the numbers you've presented and I want to run some of my analysis past you which suggests you're -$100m wrong and CDC is a loss maker, and ask a few questions, before I make a fool of myself on social media.

Unpacking this you contend that it is embarrassing to think and analyse publicly, including transparency of mistakes and confusion, and it is better to work privately, presenting only polished analysis. The hog observes that the process is the same, but with your approach, the missteps, mistakes, etc. are just hidden. They are still there i.e. the process is exactly the same, and everyone worth their salt would rather have a raw, transparent process than rely on somebody whose primary motivation is…not to look dumb. :t_up:

The hog doesn't think Snoopy gives a tinker's cuss what people think of him, and is happy for people to read his analysis and highlight shortcomings or errors. By putting his work out there, it potentially attracts brutal but robust criticism which, for anyone focused on quality of thinking and less so about making a fool of themselves, can be very useful.

[Snoopy]

Page 80 of IFT AR 2024 has the real numbers, as does pages 24-27. I can't believe someone would say the numbers are not correct or real without understanding the mechanics. For instance, land used for business A can be worth a different amount when used for business B (e.g. farm land used for stock versus the same farm land used for crops or orchards, or maybe even used for a data centre!). In addition, IFRS allows the capitalisation of holding costs such as interest for developments that take some time to come online so rather than jump to "the numbers must be wrong" - better to say "what am I not understanding?".


Let's have a look at these 'real numbers' shall we? AR2024 p80, referred values for FY2023. CDC Revenue for FY2023: $345m. Net Profit After Tax for FY2023 $762.7m. Now I am not saying the numbers aren't correct. But they obviously are not related to the operational performance of CDC. How can the net profit of a company after all taxes and expenses are taken out equal more than twice the revenue taken it? If it were not obvious before that the declared net profit at CDC was not related to operational profit, then surely this is the proof?

Now go back to slide 27 of the capital raising presentation. CDC EBITDAF for FY2023 was $215m. Take out Depreciation and Amortisation, net interest charges and tax and you will end up with a net profit after tax much lower than $215m from an operational perspective. However the actual CDC NPAT for FY2023 was $762.7m, more than three times higher than the published EBITDAF figure!

The disclaimer notes of the presentation offer an explanation:
"EBITDAF represents net earnings before interest, tax, depreciation, amortisation, financial derivative movements, revaluations, gains or losses on the sales of investments, and excludes acquisition and sale related transaction costs and International Portfolio Incentive."

It seems obvious to me that the net gains from these other sources I have highlighted in bold have absolutely monstered any gains from operational performance. And from the description of these items, it is equally obvious they are one offs and not expected to be repeated. So to claim that a CDC profit figure boosted by 'financial derivative movements', 'revaluations', and 'gains or losses on the sales of investments' is proof that managing data centres is a very profitable business activity seems to be a gross distortion of the word 'proof'.

SNOOPY

[Snoopy]

If I was going to do something like this, which admittedly I probably couldn't as I don't have the financial accounting dexterity or time to explore all sorts of extrapolations, neither do I have reason or cause to think IFT are lying or manipulating the financials, I would do all of my homework offline, build a case that I thought was rock solid, and then present it for discussion.

Rather than make myself look a bit foolish with multiple fabrications and reinterpretations of the numbers, and each of them ending in oops.


This whole matter could be settled very quickly if we had access to the CDC accounts. But we don't. We only have access to the tid bits that Infratil sees fit to feed us.

The general procedure in a sleuthing exercise such as this is to write down what you do know, and then make educated guesses about what you don't know. Put those numbers into your business model, 'crank the handle' and see what kind of calculated numbers come out. If the calculated numbers from your business modelling equation look unrealistic, then change your assumed input values and crank the handle again. Keep rinsing and repeating.

It is called an 'iterative analysis' and I make no apology for writing up my less than stellar results as I go through the process.

Nevertheless in this instance, there comes a point where you realise that however you tweak your input assumptions, there is no way you are going to get anywhere near the 'declared profit figure'. That is not the same thing as saying the declared profit figure is wrong. It is just that the declared profit figure must be made up of other non-operational items, such as those highlighted in post 3686.

SNOOPY

[Snoopy]

I think it might be because Snoopy has a hypothesis that IFT/CDC is a poor business and investment proposition, and is murdering the financials to prove it to himself and anyone else who is interested, that that is the case.


No, I have no preconceived idea about data centres being a poor investment proposition. I joined this thread to find out how profitable data centres actually are, mainly because a company called Spark that I do hold shares in, has signalled it is stepping up its investment in data centres, and I was curious to know how profitable those expansion plans for Spark might be.

The issue here is that Infratil is a very long term investor. Infratil doesn't care about the performance of CDC this year and next year. Infratil is much more interested in where CDC will be, 10, 20, 30 years down the track. Many new investment ventures follow a hockey stick profit performance pattern. By that I mean in the first few years profits follow the head of the hockey stick downwards as they rack up a few years of losses, before eventually the business turns the corner and profits rocket as they follow the handle of the hockey stick skywards.

IMV, as far as IFT is concerned, their investment in CDC is still at the head of the hockey stick. They are prepared to sacrifice profits today by recycling any cash generated to build more data centre assets, all in the aim of harvesting greater profits tomorrow. This is in contrast to Spark who will only expand their data centres at the rate at which new contracts are signed and sealed. This means it is beginning to look at though my quest to investigate the profitability of data centres by studying CDC will fail. That is because the incentive vision for running data centres at CDC is very different to the incentive vision for running data centres under the Spark umbrella.

SNOOPY

[warthog]

The issue here is that Infratil is a very long term investor.

The hog doesn't think IFT is quite as long-term investor as you think, but yes, longer-term than most. Spark stands to be out-manoeuvred by more strategic investors.

One might consider IFT a publicly-traded, infrastructure themed, private equity investor fund. Maybe sell 50% of your Spark and allocate the proceeds to IFT?

Disc. hold IFT, zero SPK.

[Snoopy]

There being a lot/too many asumptions there I'd say

One of my collegues always said assumptions are the MOAF


It was only up for a few minutes Kiora, but you changed the text in this referred post, didn't you?

The original post text was from the capital raising presentation, slide 14 talking about 'CDC key metrics' with the text:
A$2m+ EBITDAF / ICT MW p.a. (1)

As soon as I saw that text, I got an immediate headache and went straight to bed. But although my headache has now gone, I am no closer to figuring out what it is that statement means. And this is unfortunate. Because if I did understand what it meant, I think it would bring me closer to my goal of figuring out on an underlying basis, exactly how profitable these data centre businesses can be. Explanatory note (1) reads:

"Notes:
1. CDC currently generates a blended EBITDAF per ICT MW across all sites and customer segments of over A$2.0m."

Now apparently ICT stands for "information communication technology."
Current data centre capacity is 302MW (presentation slide 13).
So I take it from this that current 'ICT MW' is 302MW

And so the annual 'blended EBITDAF' over the year for the data centre portfolio as it is now is: $2.0m/MW x 302MW = $604m

Now we have to remember we are not talking about a static data centre portfolio here. Revenue over FY2024 went from $280m to $356m (slide 27). if we assume a linearly increasing average data processing capacity over the FY2024 year, this leaves us with an average working capacity of: ($280m+$356m)/2 = $318m, which is $318m/$356m= 89.3% of the end of year operating capacity. That means we need to reduce the 'annual 'blended EBITDAF' over the year' to be adjusted by that percentage.:

0.893 x $604m = $540m

We can double check this figure by looking at the actual CDC EBITDA over FY2024, which was declared to be $271m (slide 27)

Now it doesn't take a genius to recognise that the two numbers that I have reconciled that are meant to be equal are anything but. In fact one is almost exactly twice the other. So either I have become completely stupid overnight (which is possible, as I could be suffering from Covid brain fog), or this much touted "CDC metric" of:

"A$2m+ EBITDAF / ICT MW p.a. (1)"

is techno-babble to confuse shareholders and get shareholders to believe those Infratil head office boffins are so much smarter than they really are. I would still love it though, if anyone can decipher what it is that Infratil are trying to say here.

SNOOPY

P.S. The thing I really hate about 'the statement' is that it implies that x MW of data centre capacity will automatically generate $y in EBITDA no matter where the data centre is, who the customer is or what the specific conditions of any such contract might be. It seems like a genuine 'head in the sand' metric that is just waiting to fall over.