A sudden boom in giant data centres – clustered around Auckland’s northwest – is set to continue with DCI Data Centers revealing it has gained Overseas Investment Office approval to buy land at Westgate, where it will build a “major” new server farm.

CEO Malcolm Roe told the Herald it will be just the start of his company’s NZ push.

“This site is the first step for us in New Zealand and we are currently finalising a selection of further sites to meet strong demand,” Roe said.

“Increasing cloud use in New Zealand is driving the demand for several high-capacity, environmentally-friendly data centres and other related infrastructure within the country. We are pleased to be playing a key role in the development of this vital part of the digital economy.” His company targets corporate and government customers.

He anticipated two or three more data centres would be built on this side of the Tasman.

Stage 1 of the Westgate build was budgeted at $70m. More stages would be added in what would become a 10 megawatt facility (supermassive or “hyperscale” data centres are typically described by power load of their IT systems).

Roe would not put a price tag on the total build at Westgate, but server farms typically costs in the hundreds of millions.

The CEO said New Zealand appealed because more than 80 per cent of our power is from hydro sources. His company would look at options to go further green by “closing that 20 per cent gap” but they would not include solar panels – because it would take 15 hectares of solar panels to power a 10mw server farm.

Privately-held DCI, which already operates data centres in Sydney and Adelaide. In January, the company said it will spend A$400m ($420m) on what will become its third data centre across the Tasman, which is scheduled to become operational in Western Sydney in late 2022.

And rival Canberra Data Centres (CDC) has said it is spending more than $300m on two data centres, already under construction, in Auckland’s north and northwest (one is in Silverdale, the other a couple of kilometres down the road from Westgate).

Roe anticipated rapid construction at Westgate, once all approvals were granted, because the new facility would be based on his company’s standardised design. Commercial operation was slated to begin in late 2022.

Cloud computing – or using software that runs over the internet for everything from video calls to office collaboration or gaming – was already growing strongly by early 2020. But the pandemic, and the associated forced-march to remote working, accelerated the trend. Cloud computing requires huge data centres. And it’s a case of closer-is-better for those who care about performance, or the legal complications of data sovereignty.

DCI’s resource consent is still before Auckland Council, and a building consent won’t be lodged until next week, Roe said. But deputy mayor Bill Cashmore has already come out strongly in favour of the project, saying, “I am really pleased to see commercial developments ramping up at Westgate. Regional employment and commercial activities based around the whole of Auckland is a critical regional growth factor.”

DCI’s data centre might not provide local jobs on the same scale as other Westgate projects, however, such as the Costco which is currently under construction, as server farms are largely automated.

Roe said DCI’s Westgate facility would employ around 20 directly, plus up to 60 full-time equivalent roles for companies providing support services.

Intertwined efforts

NZ is moving from famine to feast with hyperscale server farms.

Currently, we have no data centres that sit in this super-giant class. Within a couple of years, as many as seven will be operational.

And the three players involved are interlinked, in the broader scheme of things.

DCI is a fully owned portfolio company of Canada’s Brookfield Asset Management.

In mid-2019, Brookfield established a 50:50 joint venture with NZX-listed Infratil to buy Vodafone’s New Zealand business.

Infratil’s other assets included a half-share of CDC.

Last year also saw Microsoft win OIO approval for three data centres in Auckland. One, at Westgate, is already under construction. (There could be some overlap with CDC, given the two companies partner so closely across the Tasman, where Microsoft has some of the servers for its Azure cloud service located within CDC facilities. So far, neither company has commented on if or how they’ll partner in NZ).

Microsoft is one of the Big Three cloud computing and data centre giants, in global terms. The other two are Google and Amazon – neither of whom has yet displayed any interest in a data centre on NZ soil, although Amazon’s AWS unit has recently doubled its Auckland staff and put satellite servers in with clients like Spark Sport partner TVNZ in what it calls an “AWS Edge” installation.

Enter Malcolm Dick

Then there’s a wild card: Datagrid, a startup backed by rich lister Malcolm Dick.

Datagrid wants to build a hyperscale data centre in Southland, figuring it could take advantage of the cooler local weather (data centres are famous power-hogs, with a lot of the energy used for air-conditioning to keep servers cool) and surplus power from Meridian’s Manapouri Power Station after Rio Tinto’s aluminium smelter at Tiwai Point has shuttered.

Dick – who founded CallPlus then sold it to the company now known as Vocus for $250m in 2016 – says the Datagrid build project would cost up to $700m – $530m for the cable, and the balance for a new offshore fibre optic cable (Auckland’s north and northwest, already home to NZ’s largest peering exchange are popular because of their proximity ot the Southern Cross Cable’s NZ landing points).

It’s a stiff ask, but Dick – and business partner Sir Eion Edgar – defied sceptics by raising around $400m for Hawaiki Cable.

The entrepreneur says Datagrid has taken options to buy land in Makarewa, a small town about 7km north of Invercargill – and that the temporary extension to Rio Tinto’s operation was a positive.

“The reality is that undersea cables and large-scale data centres are not built overnight – and in any event there is actually surplus power available for our first stage,” Dick told the Herald.

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