UPDATED: NEXTDC looks to raise $150m for second Sydney datacentre

UPDATED: NEXTDC looks to raise $150m for second Sydney datacentre

Existing facility nearing capacity following new customer contract

NEXTDC CEO, Craig Scroggie

NEXTDC CEO, Craig Scroggie

Datacentre operator, NEXTDC (ASX: NXT), is looking to raise an additional $150 million for the construction of a second datacentre in Sydney.

The company has signed a new agreement with an existing “major international customer” which has taken capacity in its S1 Sydney facility to 82 per cent from 71 per cent at June 30.

The new contract is with the same customer with which the company announced an initial contract on December 11, 2014 and exhausts the customer’s rights of first refusal relating to the S1 facility.

The contract is for an additional 1.5MW of capacity and the company is looking to add a further 30MW with the construction of a second facility in Sydney.

The company said that given its ongoing costs for the construction of second datacentres in Brisbane and Melbourne, it intends to raise additional capital before commencing construction of a second Sydney facility.

“S1 has proven to be highly successful for the company in a relatively short timeframe,” NEXTDC CEO, Craig Scroggie, said.

"We are confident that the demand in Sydney, together with our return expectations, warrants the next phase of investment.

“NEXTDC continues to evolve and refine the design of our facilities; S1 is already one of Australia’s most awarded datacentres, and with a planned 30MW at full fit out, S2 will have roughly double the capacity of S1, and be designed for its critical infrastructure to scale with customer uptake and adapt to their specific needs.”

This expansion is in keeping with NEXTDC’s strategy of significantly increasing capacity at secondary sites. The company’s second facility in Brisbane was three times that of its first and the second Melbourne datacentre had 10MW more capacity than its predecessor.

Scroggie said he believed NEXTDC could have moved earlier on the construction of S2, considering existing customer growth and demand from prospective tenants.

“We try not to sell the datacentre past 90 per cent and that is a fixed theoretical limit for us because we want to keep capacity for existing customers.

“I have to get S2 built and have to do it in record time.

Scroggie said the company had three potential sites shortlisted for the new facility and was currently in negotiations with the respective owners to finalise a location.

“The one thing that remains critically important for me and a key part of our success is that we are a channel lead company and the channel is a critically important piece of our go to market strategy.

“The datacentre alone is only a small component of how customers are buying Cloud, be it public or private, as a service,” he said.

The company entered into a trading halt on Monday, September 5 with its share price at $4.10 and will resume trading on Thursday, September 8.

The company will release a new allotment of shares to “institutional investors” to raise $50 million and a separate entitlement offer to existing shareholders to raise a further $100 million.

The allotment of shares to institutional investors will be priced at $4.06, while existing shareholders will be able to purchase new shares at $3.74.

NEXTDC said it plans to invest between $140 million to $150 million in the development of S2 across FY17 and FY18, of which $60 million to $100 million is expected to be spent in FY17.

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