Project Director - Colocation Development

NextDC shares drop 44% after data centre delay triggers profit warning. NextDC shares plunged more than 40 percent on Wednesday after the Australian data centre operator removed A$140 million ($98.4 million) of contracted revenue from its fiscal 2027 outlook because of delays to power grid upgrades at its M3 facility in Melbourne. Brisbane-based NextDC cut its guidance for net revenue to a range of A$475 million to A$500 million, from A$615 million to A$640 million, and for underlying EBITDA to A$245 million to A$265 million, from A$385 million to A$410 million, it said in a statement to the ASX. The stock slid as much as 44 percent in Sydney trading, erasing about A$3.1 billion from NextDC's market value. The revision all but erases the earnings growth that NextDC promised investors just two months ago. The midpoint of the new EBITDA guidance, A$255 million, is about 2.5 percent above the A$248.8 million the company reported for fiscal 2026, compared with growth of about 60 percent implied by its August update, according to a Mingtiandi calculation. The retreat comes less than two weeks after AI data centre developer Firmus pulled what would have been Australia's second-largest IPO. "With M3 revenue deferred, we have paused projects not backed by customer contracts and put that capital behind the capacity our customers have already contracted," said NextDC chief executive and managing director Craig Scroggie. The company's shares ended trading on Wednesday at A$53.5 each, which was down 41.72 percent from the start of trading. Community opposition. The profit warning was triggered by delays to power line works for NextDC's 225MW M3 campus opposition. Electricity distributor Jemena suspended parts of its power line upgrade for M3 in September, and has informed NextDC it does not expect to restart the work before February 2027. Jemena blamed safety concerns and lack of site access following public objections from the local community, as well as the local council withholding consent while further community consultation takes place. NextDC now expects the next increase in grid supply in fiscal 2028. The revised guidance strips out the affected M3 contracts entirely, including capacity that is already billing, because existing grid supply at the site cannot be relied on to support the full contracted power ramp in data halls already delivered. NextDC did not name the customer affected by the delay. Those contracts provide for service level credits where capacity is delivered late or not fully powered, and in some circumstances give the customer termination rights. NextDC said it is examining whether force majeure provisions offer relief, and warned that service level credits could push underlying EBITDA below the revised range. Expansion of the campus in West Footscray, about 10 kilometres west of Melbourne's city centre, faces a second delay because of Victoria's state election on 28 November. NextDC said a permit application for M3 Stages 6 and 7, lodged in February under Victoria's Development Facilitation Program, now will not be decided until 2027, because the state government will enter caretaker mode on 3 November ahead of the election. Spending freeze. NextDC also cut its guidance for capital expenditure in fiscal 2027 to A$4.5 billion to A$5.0 billion, from A$5.25 billion to A$5.75 billion. Excluding capitalised interest, which the earlier guidance omitted, the like-for-like reduction is about A$980 million, or 17 to 19 percent. The company has put all new development projects and land acquisitions on hold for the foreseeable future, and its board will evaluate selling development sites not needed in the near term. Results of a full capital expenditure review are due by the annual general meeting on 20 November. NextDC reported A$8.7 billion of liquidity at 30 September and said it remains within covenants. However, its interest cover test counts EBITDA from contracts expected to start billing within 24 months, and the company cautioned that a material change to expected customer billing profiles could adversely affect its ability to draw down senior debt, naming the M3 delays as such a potential change. NextDC has A$6.7 billion of undrawn senior debt facilities. Institutional backers. The selloff follows a run of fundraising that drew heavily on institutional capital. In April, NextDC launched a A$1.5 billion equity raise alongside an upsized hybrid securities offer, with La Caisse taking A$1.7 billion of hybrids. CPPIB crossed the five percent shareholder threshold by buying in at the entitlement offer price of A$12.70. In September, the company raised A$1.1 billion through a sale of notes convertible into shares with a conversion price of no less than A$12.40. Wednesday's intraday low of A$5.10 was about 60 percent below the April offer price. The downgrade comes less than two months after NextDC posted record fiscal 2026 results, with net revenue up 16 percent to A$405 million and contracted utilisation jumping 202 percent to 740.1MW. Social licence squeeze. NextDC is the latest Australian data centre player to collide with local resistance. Last month Goodman Group abandoned its A$798 million Project Mars data centre in Sydney's Lane Cove after 374 public submissions, only nine of them supportive. Victoria has since proposed requiring a 150-metre buffer between data centres and homes, though not retrospectively. Capital markets are also growing warier. Firmus withdrew its A$7.1 billion float on 9 October as investors balked at a A$43.7 billion valuation, with UniSuper chief investment officer John Pearce warning that the company would "have to keep coming back to the market for a lot more debt and more equity". Firmus is seeking a further A$500 million investment from Nvidia, with media reports saying co-founder Oliver Curtis is holding talks in Berlin with Nvidia founder Jensen Huang, whose company holds 7.2 percent of Firmus. Firmus is also yet to secure full funding for its data centre project in Tasmania, the Australian Broadcasting Corporation reported on Wednesday. A spokesperson for Firmus did not immediately respond to a request for comment on the reports.

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