With Asia Pacific requiring an estimated $200 billion in data centre investment over the next three to five years to meet demand from AI and cloud adoption, providers with scale and operational strength will be best positioned to secure capital for expansion, Princeton Digital Group (PDG) chairman and CEO Rangu Salgame told Mingtiandi’s 2024 Data Centre Forum on Wednesday. Watch the full recording>>
In a spotlight interview moderated by Jonathan Atkin, global head of communications infrastructure investment research at RBC Capital Markets, Salgame pointed to the increasing volume of capital being deployed into the region’s digital infrastructure assets by global institutional investors, with larger operators set to expand their dominance as capital providers opt to back players with proven track records.
“There are very large infrastructure funds, private equity funds, sovereign funds, which have put together massive amounts of capital towards this sector,” said Salgame. “The capital formation happening now is going to follow companies which have a good track record of execution. So that’s going to drive successful companies to get more successful…the strong are going to get stronger, the big are going to get bigger, and are going to be more aligned with the customer requirements, and the capital is going to flow towards them.”
Salgame spoke at the Yardi-sponsored forum just weeks after Singapore-based PDG unveiled a $5 billion investment programme across India, Malaysia, and Indonesia, with the company having acquired land for 500 megawatts of new capacity in those markets.
Capital is King
PDG, which currently operates a 1-gigawatt-plus portfolio across Singapore, Japan, India, China, Indonesia, and Malaysia is said to be raising $1 billion in fresh equity and debt capital to fund that expansion.
Rangu Salgame, Chairman, Chief Executive Officer and Co-Founder, Princeton Digital Group
“If you look forward, we’ll definitely be looking to raise more equity,” Salgame said. “The business is going to require significant capital as we scale further and we will be looking at bringing in equity capital at the group level very soon, and that’s going to drive our next wave of investment and growth, while also continuing to bring in debt at the project level. Those two things will continue to go in tandem.”
The company is currently backed by US private equity giant Warburg Pincus, the Ontario Teachers’ Pension Plan (OTPP), and Abu Dhabi sovereign fund Mubadala Investment Company. Salgame said PDG is currently optimising its capital structure on the debt side to reduce its cost of capital and to release more equity capital for deployment in new markets.
As AI adoption boosts capacity requirements by as much as fivefold, access to capital will be a key factor behind operators’ ability to meet that demand, Salgame said.
“I think number one is access to capital,” said Salgame. “It is a capital game. I think the scale of capital required has gone up four, five times more than what was in cloud. So we will require about $200 billion of capital in the next 3 to 5 years just here in Asia – that’s the scale of capital that the industry needs.”
Bigger Campuses
PDG is expanding through both acquisitions and greenfield developments, with AI-driven capacity requirements boosting project scale by as much as four times.
“M&A has always been an important pillar of our strategy to grow and enter new markets, but large scale capacity to develop and grow is going to be a greenfield or development approach,” said Salgame. “The size and the scale of the campuses we are building are going to multiply by three or four times..300 to 500 megawatt campuses are the scale of what we’re going to be building for AI. So that’s another important shift in the way we are seeing growth in the next couple of years.”
In addition to the six markets PDG currently operates in, the company has also identified Australia and South Korea as markets primed for capacity expansion as local enterprises adopt cloud platforms, while Melbourne, Mumbai, Johor, and Tokyo have emerged as major AI hubs for global hyperscalers.
“From an AI perspective, we are seeing for the first time in Asia Pacific a new technology curve in which the large global hyperscalers are picking markets in Asia as part of their global deployment,” said Salgame. “And that has been a fundamental shift that we have seen in the last 18 months. If you look at markets like Johor or Mumbai, these markets are being deployed for AI capacity by the hyperscalers and it’s not about serving just the local markets of India or Malaysia or Singapore. These AI deployments are part of the global architecture, global deployment of these hyperscalers. That has been a big shift, and we are at the early stages of seeing that shift happening.”
Mingtiandi’s 2024 Data Centre Forum continues on Thursday with a panel discussion on Southeast Asia’s data centre markets featuring Woon Teng Koh, director of corporate development with Equinix; Ben Chow, head of research for Asia at MSCI Real Assets and Ai Leen Tang, a Malaysia-based partner with Baker McKenzie member firm Wong & Partners.
Next week the forum will feature an interview with Digital Realty Asia Pacific managing director Senere Nah on Tuesday, 15 October before concluding on Thursday, 17 October with a panel focused on the Japan and Korea markets. That final panel will include speakers from ESR, DC Byte and Gaw Capital Partners.
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