Tech giant shares plunge 40pc after delays to Melbourne data centre

Community opposition to one of Melbourne's largest hyperscale data centres has smashed the value of one of Australia's biggest companies.

A neighbourhood dispute over power poles has forced multi-billion-dollar tech giant NextDC to cut its net earnings and revenue forecasts by tens of millions of dollars, with a planned expansion hit with power supply and government approval delays.

The company, among Australia's largest 100 listed companies, notified the stock exchange this morning that its net revenue for the current financial year would be slashed by a third — now $475 million to $500 million — down from $615 million to $640 million.

The company's operating profitability was also revised down to $245 million to $265 million, from $385 million to $410 million.

Following this morning's announcement, NextDC's stock plummeted by 40 per cent.

NextDC attributed the revised estimates to delays to electricity network upgrades by energy supplier Jemena, required to increase power supply to its M3 data centre in West Footscray.

The West Footscray data centre, located just 15 metres from homes, has long been the subject of community opposition due to concerns over diesel and noise pollution. 

The installation of towering power poles to accommodate the facility's vast electricity use became another flashpoint earlier this year.

In September, Jemena was forced to halt the installation of 15-metre-high power poles in Yarraville after being met with resistance from residents, several of whom blocked crews by leaving their cars and bins out.

The power poles can carry up to 66,000 volts of electricity, approximately 160 times the voltage of previous power poles.

Local councils and residents argued that they had not been adequately consulted over the upgrades.

In its announcement to the ASX on Wednesday morning, NextDC said the delays meant the next grid supply for West Footscray was now not expected until 2028, deferring "the delivery and billing of contracted capacity".

"Jemena has advised NextDC that it has suspended parts of the network works required for the next increase in grid supply to M3 Melbourne," NextDC chief executive Craig Scroggie said.

"We have taken the affected M3 contracts out of FY27 guidance until we can reliably estimate their contribution."

In a call with investors this morning, NextDC's group chief development officer Simon Cooper said the company was "exploring all avenues", including finding alternative locations for the power poles, or placing electrical cables underground.

"Undergrounding does take time and there's not an immediate option that we can work on now. But it is something that we are absolutely considering," Mr Cooper said.

Residents group renews calls for financial compensation

In March, NextDC applied to Victoria's planning minister under the government's fast-track Development Facilitation Program for the West Footscray centre to double in size to cover a 10-hectare parcel of land.

The company says that application has also been delayed until after the November state election, with the Victorian government "taking longer than expected".  

NextDC said it had put all new development projects and land acquisitions on hold for the foreseeable future and would evaluate capital recycling opportunities, including potential sales of selected development sites. 

Local residents group Citizens of Tottenham welcomed news of the delays to the M3 data centre, describing it as a battle between David and Goliath.  

“It's a significant moment for our area and a reminder that the people living beside these developments cannot simply be pushed aside,” the group's president, Jacqui Glover, said.  

Fellow member Sean Brown repeated calls for impacted residents to receive remediation and financial compensation, including voluntary buybacks.

"NextDC M3 doesn't have social licence for the existing building, they certainly don't have it for an expansion," Mr Brown said. 

"It's now up to NextDC to meaningfully respond to residents' remediation proposal. This lack of social licence won't change after 28 November and whoever forms government after then needs to respect this." 

On Monday, the data centre operator asked the stock exchange to suspending trading in its shares, citing the need to provide a market update on the impact of the power supply delays. 

The company's recent financial results noted a planned capital expenditure outlay of $1.3 billion, and stated that its West Footscray centre had a "total planned capacity upgraded from 200MW to 225MW". 

Valued at close to $7 billion, NextDC has 17 operational data centres in Australia, with another nine in the development or planning stages.   

Amid growing resistance to new data centres, the Victorian government announced new regulations to ban data centres near homes and schools, including 150-metre buffer zones, while mandating the use of renewable energy and non-drinking water.

Earlier this month, AI data centre company Firmus spectacularly withdrew its application to list on the ASX, after failing to gather sufficient investor interest.