NEXTDC secures $937 million from institutional offer

NEXTDC secures $937 million from institutional offer

NEXTDC's S3 data centre in Artamon, Sydney is set for an upgrade to a built capacity of 50MW, before eventually reaching 80MW under existing plans for the site. 

NEXTDC's (ASX: NXT) massive raise to speed up the development and fit-out of data centres in Sydney and Melbourne has received a firm vote of confidence from institutional investors, raising proceeds of approximately $937 million in the first round before the offer opens up to retail shareholders.

Last week the Brisbane-based company founded by serial internet infrastructure entrepreneur Bevan Slattery announced a fully underwritten one-for-six pro rata $1.32 billion entitlement offer to support numerous projects in Australia, amidst "unprecedented growth in customer demand".

The offer is expected to support the bulk of funding required for four high-expenditure projects, including upgrades to the S3 facility in Artamon, Sydney and the M2 facility in Tullamarine, Melbourne, which will see these sites reach built capacity of 50MW and 60MW respectively.

NEXTDC eventually plans to lift the capacity of S3 Sydney to 80MW, which for a sense of scale would be more than 35 times larger than the company's first ever data centre built in Brisbane in 2011. For comparison, the world's largest data centre, Switch's The Citadel Campus in Nevada, will have 650MW upon completion.

The built capacity enhancement projects are set to cost the group $730 million, while a further $650 million is contemplated for fast-tracking the development of the first data centre building in Sydney's S4 with 10MW of initial built capacity, and Stage 1 of building works for S5 in Macquarie Park.

Once finalised, the S4 Sydney data centre - sitting on 124,000sqm of technical space - is expected to have 300MW of IT capacity, which would be significantly higher than any other site the company is operating.

These capital deployments represent part of almost $2.6 billion in capital requirements in the pipeline for the group, to be funded from a combination of the offer and existing liquidity.

NEXTDC is targeting $500 million to spend on identified land acquisition opportunities in Asia-Pacific at various stages of evaluation, and also allocated $643 million for capital expenditure in the current half-year.

It is estimated the current entitlement offer under way will generate transaction costs of $25 million, with an opening of the retail component scheduled for 18 April with the round to close on 2 May.

The institutional raise at $15.40 per new share saw a take-up rate of 99 per cent, with the balance of around 1 per cent allocated on a proportional basis to eligible institutional shareholders who chose to for additional shares over their existing entitlements.

"We are delighted with the exceptional level of support from our existing institutional shareholders in this entitlement offer," says NEXTDC chief executive officer and managing director Craig Scroggie.

"The raising ensures NEXTDC is positioned to continue to take advantage of the unprecedented growth in demand for data centre services that we are seeing across the market.

"Retail shareholders will shortly be invited to participate in the entitlement offer on a pro-rata basis."

The announcement last week coincided with NEXTDC  affirming its earnings guidance for FY24. The group says it is on track for revenue between $400 million and $415 million and underlying EBITDA of between $190 million and $200 million.

NEXTDC delivered underlying EBITDA of $102 million in the first half of FY24, up 5 per cent from a year earlier, while revenue surged 31 per cent to $209.1 million.

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