NXT & AJD - NEXTDC & Asia Pacific Data

[Snoopy]

From the road show presentation for the April 2024 capital raising:
https://www.listcorp.com/asx/nxt/nex...n-3017856.html

There is a lot of speculation attached to the datacentre market, especially about the future. 'Construction cost' is one aspect of datacentres we can feel more confident about, because those numbers are 'in the past'. Yet even then, datacentre providers can be coy about exactly how much money they have spent on various projects. In the interest of transparency, I think it is worthwhile recording in one place (i.e. here) from Australasian sources exactly what we do know 'for sure' about the cost of building a datacentre.





From the Spark Thread (NZX forum)

Post 2257 https://www.sharetrader.co.nz/showth...=1#post1058688
2.3MW datacentre opened in 2014 in Takanini, Auckland, - cost $NZ60m, or ($NZ60m/2.3MW=)$NZ26.1m/MW.





From the Infratil Thread (NZX forum)

Post 3602 https://www.sharetrader.co.nz/showth...=1#post1057693
In 2022, Canberra Data Centres (CDC) opened two 14MW datacentres in Auckland (in Hobsonville and Silverdale), for a total capacity of 28MW and costing 'more than $NZ300m', or 'more than' ($NZ300m/28MW=) 'more than' $NZ10.7/MW

Post 3750 https://www.sharetrader.co.nz/showth...=1#post1059976.
Future datacentre roll outs are being completed over three years.

Post 3753 https://www.sharetrader.co.nz/showth...=1#post1060160
Land value of datacentres is typically less than 10% of the balance sheet book value.





From the NextDC April 2024 Road Show presentation (link in referred text above)

Slide 17 'S4 Sydney'. Building works incorporating 10MW built capacity and critical high voltage infrastructure, $A350m, or ($A350m/10MW=)$A35m/MW

Slide 17 'S3 Sydney'
https://www.datacenterdynamics.com/e...9-uncertainty/

had an original build cost of $A350m (back in 2020) with an initial capacity of 12MW. 'with a total capacity of 80MW expected by the first half of 2022.' That 'first half of 2022' target was not met, as the green light to expand capacity to 50MW was only given in April 2024. Prior to this built capacity was 13.5MW
https://www.datacenterdynamics.com/e...ter-in-sydney/

The $A400m of S3 'accelerated build capacity' will provide incremental capacity of (50MW-13.5MW=)36.5MW. This equates to ($A400m/36.5MW=)$A11.0m/MW

Slide 17 'M2 Melbourne'. Extending the base building and capacity to 60MW. Some history of 'M2 Melbourne' is here:
https://www.datacenterdynamics.com/e...ane-melbourne/

Land to build two datacentres: In Melbourne (M2, initial capacity 6MW) AND Brisbane (B2, initial capacity 1.5MW) was acquired in 2016, at a combined project build cost of $A160m. With costs allocated in proportion to capacity, I get the initial build cost of M2 to be ( 6/7.5 x $A160m =)$128m. This equates to ( $A128m/6MW=)$A21.3m/MW

This article:
https://www.afr.com/technology/why-n...0200513-p54sh1

suggests M2 was a 'problem child', with only 4MW of capacity being used until 2020, after which customers signed up to another 33MW of new contract options. Now 33MW+4MW=37MW. Three years on is enough construction time to install equipment to fulfill those contracts, plus a bit more. (Edit: This may be correct. But actual capacity built at the April 2024 capital raising time, slide 27 of the presentation, was only 28MW. So there is 32MW to go to reach M2 site capacity of 60MW). The cost of finishing M2 is said to be $A330m. This equates to ($A330m/32MW=)$A10.3m/MW.

The afr article concludes with a description of the business activities of NEXTDC, which provides some clarity on the NEXTDC business model:
"NEXTDC builds hybrid data centres, which cater to both the retail and wholesale customers. Retail data centre deployments tend to be smaller contracts, which rely on the data centre providing additional services like connectivity to cloud providers and on-site staff. Wholesale contracts are those where businesses with large footprints, like banks, rent the space and power but provide their own services."

In case you are wondering how NextDC fits in with the big multinational data centre players, Google Cloud, Microsoft Azure, AWS, Oracle Cloud and IBM Cloud are all customers of NextDC.

From the April 2024 presentation slide 21
"In Australia, cloud service providers have preferred to outsource their IT infrastructure needs to third-party providers such as NEXTDC, as it is typically more cost-effective, and they are able to rely on NEXTDC’s dedicated expertise and resources for data centre development and services."

SNOOPY

[Snoopy]

First observation: The two costings we have for the smaller older datacentre facilities (Spark's Takanini, 2014) and the initial stage of Melbourne M2 (NextDC, 2020) are noticeably higher than present day costs on a 'dollar per Megawatt' basis. I am not surprised by this. Spark Takanini's building works I know were constructed with further 'computer power inside expansion' in mind. IOW there was some 'future proofing' in the initial Takanini build. This may have been true for NextDC's Melbourne M2 site as well. NextDC Melbourne M2 was designed to have more than one story of datacentre based on what would have previously been seen as a 'single data layer footprint'. This made M2 a pioneering design for NextDC. It is the kind of architecture that will be required, as NextDC move forward in their plans to build datacentres in Asia (Kuala Lumpur in Malaysia is already in development) . The ground floor of a civil structure for a multistory building has to be more robust (read expensive to build) than if the building were a straight single story design plan. So it is only natural that the occupiers of the first stage of such a complex have a more expensive structure over which to spread their working computer cost overheads.

Also expensive on a dollar per Megawatt basis was NextDC's S4 Sydney site. But it was made clear that part of the reason for that was the electrical wiring work needed to bring sufficient electrical power to the building site to allow the fully finished development, some years down the track, to operate. It is important to set up a site with sufficient power operating capacity for foreseeable future needs. This point was brought home with NextDC's Melbourne M2 site, where the finishing cost per Megawatt of the completed data centre was only around half the establishment cost base.

The three more recent developments:
1/ CDC in Auckland New Zealand (cost $NZ10.7m+ /MW)
2/ NextDC Sydney S3 (last stage cost forecast $A11.0m/MW)
3/ NextDC Melbourne M2 (last stage cost forecast $A10.3m/MW)

are quite close in development cost on a dollar per Megawatt basis. Melbourne M2 I would suggest is the more efficient build, simply because of the smaller footprint made possible by building one data centre on top of another.

SNOOPY

[Snow Leopard]

Hi Snoopy

A little piece about Data Centres & Power Consumption in Oz

Mentions NEXTDC

[Snoopy]

Hi Snoopy

A little piece about Data Centres & Power Consumption in Oz

Mentions NEXTDC

I can see why so many of these datacentres put 'token' solar panels on the roof. For people 'looking over the fence' it gives the impression that the great buzzing box behind the security fence is generating its own power, even if the net effect is that no solar generated electrons will ever travel out of the complex, and plenty of electrons will be required to travel the cables in the inwards direction.

Slide 16 in the April 2024 'entitlement offer presentation', showing 'Built Capacity' and 'Contracted Utilisation' I have reformatted the bar graph into a table, and extended it by forecast below.

	Built Capacity (MW)	Contracted Utilisation (MW)
12/20A	89MW	71MW
12/21A	96MW	76MW
12/22A	129MW	84MW
12/23A	141MW	149MW
12/24F	?MW	177MW
12/25F	?MW	211MW
12/26F	?MW	251MW
12/27F	?MW	299MW

The forecast figures, from December 2024 onwards (note 1 from slide 16 in the presentation, are based on a compounding annual growth rate of 19% as estimated in the the 1.451 Research’s DatacenterKnowledge Base, S&P Global Market Intelligence (March 2024) (Refer to page 14). We are talking a doubling of contracted space over four years.

The money raised in the April 2024 capital raising is earmarked for:

i/ S3 Sydney -accelerated built capacity, $A400m, 36.5MW
ii/ S4 Sydney -Stage 1 development, $A350m, 10MW
iii/ S5 Sydney -Stage 1 development, $A300m, 0MW (building works only)
iv/ M2 Melbourne -accelerated built capacity and base building, $A330m, 32MW

That is a total 'new datacentre pipeline' of: 36.5MW+10MW+32MW= 78.5MW. From this we need to take off the 8MW in the above table 'sold in advance' to leave 70.5MW of new processing capacity on the drawing board.

149MW + 70.5MW = 219.5MW.

219.5MW of capacity will cover the 211MW projected forward demand as a December 2025. But that date is only 18months away. Either NEXTDC do not believe their externally supplied growth assumptions. Or there may be the need for another capital raise for NEXTDC from as early as mid 2025!

SNOOPY

[Snoopy]

NEXTDC	Built Capacity (MW)	Contracted Utilisation (MW)
12/20A	89MW	71MW
12/21A	96MW	76MW
12/22A	129MW	84MW
12/23A	141MW	149MW
12/24F	?MW	177MW
12/25F	?MW	211MW
12/26F	?MW	251MW
12/27F	?MW	299MW

Reflecting on the above table, with datacentre capacity doubling every four years, I do wonder where the workforce to build these new data centres is going to come from. Writing down a table as the one above is the easy bit. But building is a linear profession, where you cannot exponentially increase your output. So my reading of the above table is that NextDC is going to require twice as many builders working for them over the next four years, compared to the numbers they had working for them over the last four years. Is such a ramped up building workforce available? Particularly when datacentre competitors will be ramping up their build programs exponentially over the same time frame?

My other concern over this projected build program is how it fits in with the 'culture' of adopting new technology. I can relate to the idea of a slow burn beginning (refer Slide 16 in the entitlement offer document)
https://www.listcorp.com/asx/nxt/nex...n-3017856.html

where demand creeps upwards for two years (12/20 to 12/22) before it suddenly explodes. This is the kind of market behaviour you might expect with one of the megaproviders like Microsoft Azure decides to hit the market. This brings the market to the attention of other megaproviders who suddenly decide: "Hey, we want to be part of that action as well." All at once other megaproviders decide they want a piece of the action too and the likes of AWS, Salesforce, Workday and Servicenow stomp into town on, in this example, Microsoft's coat tails. But after all of the big boys arrive in town, what then? Dose the build rate for new data centres continue to go up exponentially? My guess is no, because there will likely be an overbuild of datacentres if everyone believes it is 'easy money', that will be followed by a consolidation phase. We also know that as technology improves, more processing capacity will likely be available for less power use. Meaning quite a bit of future growth may be available by just upgrading existing processing space. Thus I think there is a good chance that after 2027, the exponentially increasing demand graphs, such as those that appear in slide 11, may actually flatten out. The graphs offer no comment on the post 2027 datacentre environment. But readers of those graphs will no doubt be expecting the expansionary trends will continue, given that there is no alternative commentary given.

SNOOPY