$148m giant data centre for Auckland CBD

“We are not that different to a road, rail or port asset. What we are building is the infrastructure that’s supporting the growth of the digital economy” - NextDC CEO Craig Scroggie. Photo / File

Another giant data centre has been announced for Auckland - and this time it’s not in the northwest but the CBD.

ASX-listed NextDC will spend A$140 million ($148m) on its first New Zealand data centre with a power requirement of 10 megawatts, with a possible maximum capacity of 15MW.

The Australian firm is raising A$618m by issuing new shares (the A$416m institutional leg of its raise closed yesterday; a retail offer for the balance is open until the end of this month). Part of the new capital will also be used for expansion into Malaysia.

“Building upon the success we have achieved in Australia over the past decade, we aim to replicate our proven business model in these new markets,” NextDC chief executive Craig Scroggie said.

NextDC has not commented on the location of its Auckland data centre, but records show it has bought five parcels of land to form a block surrounded by Nelson and Hobson streets near spaghetti junction. The land totals 2580sq m, and has a combined rateable value of $21.9m.

All of the properties were sold late last year to NextDC NZ (a fully owned subsidiary formed in September) by PC Campbell Investments.

Vector chief executive Simon McKenzie earlier told the Herald that Auckland’s wave of new “hyperscale data centres” - fuelled by the boom in cloud computing - will consume a total of around 200 megawatts of electricity at peak usage, roughly the amount required to power some 200,000 homes. For context, the average demand in Auckland today is about 1700MW.

Scroggie wouldn’t comment on talks with the lines company or power providers, or the design of the new data centre, citing commercial confidentiality. NextDC’s customers across the Tasman included Telstra, Optus and the Chemist Warehouse.

A spokesman for Vector said the lines company does not comment on negotiations with individual customers but did offer: “Vector considers all new connections based on scale and location. We are confident we can add 10MW to the CBD but it’s important to understand the different drivers we consider. For example, we look at the load requirements of the individual customer while also factoring in the impact on the wider system. We also work through commercial arrangements with the customer to ensure fairness and equity across all Auckland electricity consumers.”

The situation will be eased by the fact NextDC’s data Auckland server farm won’t chug its full load from the get-go. The first phase of the data centre to open will consume 1.7MW.

Another factor is that the 200MW or so chugged by the new data centres won’t be all on top of the city’s current load. The data centre operators say customers using fewer computers at their own offices, and more cloud computing servers, is more power efficient overall.

And while they will draw major amounts of energy, they are also signing big contracts that are helping to fund new power stations.

Amazon Web Services, for example, has committed to buy 50 per cent of the renewable energy capacity of Mercury’s new 103 megawatt Turitea South wind farm, near Palmerston North, which went live on May 4 (see a round up of new renewable power projects here).

NextDC, which has a market cap of A$5.5 billion, is often used by analysts as a point-of-reference as they gauge the value of privately-held rival Canberra Data Centres (CDC) - half owned by NZX-listed Infratil.

Infratil, due to report on Monday, has revalued its 48.1 per cent stake in CDC multiple times - always upward - since it first bought its holding in 2016 for A$392m ($412m). Most recently on March 24 this year when it said its CDC stake was worth between $3.17b and $3.79b - a $412m jump from September that consolidated the data centre operator’s position as Infratil’s largest single holding as the cloud computing boom shows no signs of abating.

CDC's 14 megawatt "Hobsonville 1" data centre in northwest Auckland, which also went live in November as part of the firm's $300m build. It's twinned with Silverdale 1. CDC said in January that it's bought land for the construction of extra facilities to add another 12MW of capacity. Photo / Chris Keall

CDC was first out of the blocks with the new wave of so-called “hyperscale” data centres as it spent more than $300m on data centres - now operational in Hobsonville (14MW) and Silverdale (also 14MW) - with a third in the works that will add another 12MW. “Future builds” in Auckland will add another 70MW, investors were told in March.

AWS (Amazon’s cloud computing division) recently went live with the first phase of its new “local zone”, from an undisclosed location (the geek community chatter indicates it’s housed within Spark’s newly expanded 10MW data centre in Takanini (neither firm will comment).

The largest player in construction terms at present is DCI - the data centre builder and operator owned by Canada’s Brookfield Asset Management, which “white labels” facilities for the likes of top-tier players like Amazon and Microsoft.

DCI spent $66m to buy a 5.8ha horticultural site in Albany, which will become a $400m, 40MW facility hosting some 80,000 servers. A smaller $200m, 10MW facility at Westgate recently saw its first stage go live.

The 10MW data centre at Westgate. Photo / Chris Keall

The landscape is complicated. Brookfield cooperates with CDC co-owner Infratil in another context. The pair co-own One NZ (formerly Vodafone NZ).

But other elements of the data centre industry can be described in simple terms.

“What we have built here is an infrastructure asset. When I explain this to a lot of shareholders and the investment community I tell them that we are a ‘hotel for computers’,” NextDC boss Scroggie told The Australian earlier.

“We are not that different to a road, rail or port asset. What we are building is the infrastructure that’s supporting the growth of the digital economy for the next decade or two.”