Neighbourhood power pole dispute wipes billions in value off Australian data centre giant

A neighbourhood dispute over towering concrete power poles in Melbourne has helped wipe $2.9 billion off the value of one of Australia’s biggest data centre companies.

NextDC shares nosedived 42 per cent on Wednesday after delays getting enough electricity to its West Footscray data centre prompted the company to slash its financial forecasts.

At the centre of the problem are concrete poles standing up to 22 metres tall in West Footscray and Yarraville.

They were planned to carry the high-voltage electricity needed by NextDC’s M3 data centre but drew swift backlash from residents.

Electricity provider Jemena stopped connection work in late September and began consultation with locals and other stakeholders.

The electricity work is now not expected to resume until February, delaying NextDC’s plans to add capacity at M3 for an unnamed customer already using the facility.

“We are obviously disappointed to face these challenges and be in a position that we hadn’t planned to be in,” chief executive Craig Scroggie told analysts and investors, according to the Australian Financial Review. 

The company now expects underlying earnings of between $245 million and $265 million for the 2027 financial year, compared with its previous forecast of $385 million to $410 million.

Expected revenue has also been cut to between $475 million and $500 million, well below the $615 million to $640 million previously forecast.

NextDC has responded by cutting its planned spending by $750 million this financial year and pausing projects that do not yet have customers signed up.

It is also considering selling about $750 million worth of development sites in Sydney and Melbourne to bring in extra cash.

“Every option has to be considered here for ensuring we maximise shareholder value,” Scroggie said.

The company is trying to find other ways to deliver enough electricity to M3, including sending additional power through existing connections, moving some planned capacity elsewhere or changing where the concrete poles are installed.

Putting cables underground is another possibility, although chief development officer Simon Cooper said a fully underground network was “extremely unlikely”.

There is another hurdle at M3, with additional transformers at the Brooklyn Terminal Station also expected to be completed later than previously forecast.

NextDC warned its revised forecasts could take a further hit if forced to compensate customers for failing to meet contract terms.

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The company is also waiting for Victorian government approval to expand M3, with Scroggie acknowledging there was “further work to do” with the community.

Despite the problems surrounding the Melbourne site, he said demand for data centre space remained exceptionally high.

“There is very little capacity available anywhere, not just in Melbourne or in Australia, anywhere in the world,” Scroggie said.

“And even finding five megawatts of data centre capacity today is a huge challenge … We’ve never seen a shortage of digital infrastructure like we are seeing right now.”