DigiCo Infrastructure REIT has secured a 15-year, 71MW contract with a global technology firm, taking its SYD1 data centre to full contracted capacity. The agreement supports a fully funded 52MW expansion and extends the Australian portfolio’s weighted average lease expiry beyond 10 years.
- 71MW SYD1 contract with investment grade credit support
- SYD1 reaches 100% contracted capacity across 88MW
- 52MW expansion covered by a fixed-price D&C contract
- Australian portfolio lease expiry rises from about three years to more than 10 years
- FY27 Underlying EBITDA guidance reaffirmed at $120m-$125m
15-year contract fills SYD1
DigiCo Infrastructure REIT (ASX:DGT) has filled its SYD1 data centre to 100% of its 88MW capacity with a 15-year contract for 71MW signed with an unnamed global technology firm. The customer has investment grade credit support, although the agreement remains subject to customary conditions and approvals and its value has not been disclosed.
The contract includes the reallocation of 20MW of existing contracted capacity. The other 17MW at SYD1 is leased to co-location customers, with DigiCo reporting average renewal spreads of about 8% across its Australian portfolio since its IPO. The announcement turns the 52MW expansion plan into a fixed-price construction program, following earlier reporting that the project had advanced with customer letters of intent.
Lease duration changes portfolio profile
For DigiCo, the most immediate portfolio effect is duration rather than just capacity. The new agreement lifts the Australian portfolio’s weighted average lease expiry, measured by contracted income and assuming the full 88MW at SYD1 is producing income, from about three years to more than 10 years. Weighted average annual escalations are expected to be about 3%, based on fixed increases and CPI-linked reviews assuming 3% inflation.
The result gives the trust greater contracted revenue visibility, but the income will arrive in stages. The first 10MW of the SYD1 expansion is expected to be energised and income-producing in late Q4 FY27, with the balance scheduled progressively through FY28 in line with customer requirements.
Fixed-price build remains fully funded
Shape Australia has been appointed head contractor under a fixed-price lump-sum design and construct contract, while Laing O’Rourke remains the integrated delivery partner. The project will adapt an established data centre asset with approved grid capacity, water access and State Significant Development Approval in place. DigiCo says existing customers’ uptime will be maintained while work takes place inside the operating facility.
The expansion is covered by existing liquidity, available debt facilities and proceeds from US asset sales, consistent with the US asset sales strategy previously identified as a funding source for Australian growth. The company expects FY27 capital expenditure of $300m to $500m, weighted towards the second half, within its previously announced combined SYD1 and ADL15 estimate of $1.2bn over FY27 and FY28.
Guidance holds as delivery becomes the test
DigiCo reaffirmed FY27 Underlying EBITDA guidance of $120m to $125m, including two months of EBITDA from CHI1 before its expected sale. Management also maintains a pathway to approximately $250m of Australian Platform Stabilised EBITDA once SYD1 and ADL1 reach stabilised occupancy and all contracted capacity is online and billing.
The encouraging part of the announcement is the combination of a long-dated customer commitment and a funded construction plan. The unresolved part is execution: the contract still has conditions to clear, the build must be delivered in an operating data centre, and the first incremental revenue is not expected until late FY27.
Bottom Line?
The contract materially improves revenue duration at SYD1, but value creation now depends on approvals, staged energisation and keeping the expansion within its funded delivery plan.
Questions in the middle?
- When will the customary conditions and approvals for the 71MW contract be satisfied?
- Will the first 10MW be energised and income-producing by late Q4 FY27?
- How will the $300m-$500m FY27 capital program affect debt, liquidity and returns as SYD1 and ADL1 scale?