CDC's 14 megawatt Hobsonville 1 data centre in northwest Auckland. Photo / Chris Keall
CDC's 14 megawatt Hobsonville 1 data centre in northwest Auckland. Photo / Chris Keall
Infratil’s $1.15 billion capital raise to help fund growth of its data centres is expected to be well-supported and may have implications for the broader market.
The infrastructure investor, which has interests in the digital infrastructure, renewable energy, healthcare, and airport sectors, said the funds would go towardsexpanding transtasman data centre company CDC.
The capital raise will be one of the biggest in the New Zealand market in recent years.
“I think they will see strong interest in it,” Matt Goodson, managing director at Salt Funds, said.
“I would be surprised if it wasn’t well oversubscribed.
“CDC has an extremely strong growth outlook and they clearly need an equity portion for the funding of that,” he said.
The issue could see some investors selling down their holdings in other stocks to take up shares in Infratil, and there was evidence of that on the market soon after the capital raise was announced.
Canberra-based CDC - 48.2 per cent owned by Infratil - is the largest privately owned and operated data centre business across Australia and New Zealand.
“Plus, there will be a whole range of index implications for Infratil, so its weight on the New Zealand index will go up quite a bit,” Goodson said.
“Infratil will almost certainly go into the S&P/ASX300 index and possibly some other global indices,” he said.
Data centres were a “red-hot’ investment area right now, Goodson said.
“With CDC, Infratil has the capability to build and execute well ahead of a number of other players, so it is very much in the right place at the right time,” he said.
Mohandeep Singh,portfolio manager at Craigs Investment Partners, said news of the capital raise did not come as a huge surprise.
At the time of its result in May, Infratil outlined an ambitious capex plan for CDC but was light on details as to how it would be funded.
“This is a business that’s clearly got some pretty strong structural growth elements in front of it.”
Singh said there is a lot of cash “sitting on the sidelines” after accumulating over the last few years.
“There is no shortage of appetite for good opportunities like this.”
Singh said the capital raise would make a pleasant change from recent trends; a company raising funds for growth rather than for shoring up a tattered balance sheet.
Infratil said demand for data centres continues to accelerate on the back of cloud adoption and significant investments in generative artificial intelligence.
Data centres chew through vast amounts of electricity and are measured by how much they use.
The rapid increase in demand has led CDC into advanced negotiations with customers for over 400 megawatts (MW) of capacity across multiple sites, which is expected to accelerate CDC’s capital expenditure and funding needs.
CDC’s development pipeline continues to expand with the inclusion of the Marsden Park development in Sydney - a 720MW campus - more than double CDC’s current operating capacity - bringing CDC’s total planned capacity to 1870MW.
Australia’s Future Fund and Commonwealth Superannuation Fund, which own 25 per cent each of CDC, will be putting up similar amounts of cash for CDC’s expansion.
The equity-raising comprises an underwritten $1b placement of new Infratil shares and a $150 million non-underwritten retail offer of new shares, with the ability to accept over-subscriptions.
Jason Boyes, chief executive of Infratil.
Infratil chief executive Jason Boyes said CDC had been one of the company’s most successful investments, with its stake independently valued at $4.42b, about 10 times what was first invested in 2016.
“CDC continues to see a surge in demand for data centre capacity,” he said.
Proceeds of the equity-raising will be used to fund its accelerated growth, and provide additional balance-sheet flexibility to let Infratil continue to invest across its portfolio.
“Demand continues to accelerate on the back of cloud adoption and significant investments in generative AI,” Boyes said.
The underwritten placement will be conducted through a bookbuild in which eligible investors in New Zealand, Australia, and other jurisdictions will be invited to participate.
A trading halt has been granted by NZX and ASX while the bookbuild takes place.
The placement will have 98.5 million new ordinary shares, about 11.8 per cent of the current issue, to raise about $1b at $10.15 each — a 6.8 per cent discount to the company’s last traded price on Friday.
The retail offer aims to raise $150m with the ability to scale applications or accept over-subscriptions at Infratil’s complete discretion.
Following the equity raising, wholly owned group gearing will fall from 20 per cent to 11.8 per cent.
Australia’s Barrenjoey Markets, Goldman Sachs, and UBS New Zealand are acting as joint lead managers for the issue.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
